2.A. COMPETITIVE MARKETS: DEMAND AND SUPPLY

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2.A. COMPETITIVE MARKETS: DEMAND AND SUPPLY

By the end of this sequence of learning you should be able to explain each of the following and demonstrate Real World Examples (RWE's) to illustrate each:
The Price Mechanism
  • Explain the meaning of the Price Mechanism.​
Demand
  • Explain the meaning of the term 'market'.
  • Define 'demand'.
  • Draw a demand curve.
  • Explain the law of demand verbally and using diagrams.
  • Explain that the demand curve represents the relationship between the price and the quantity demanded of a product, ceteris paribus.
  • Describe the relationship between an individual consumer's demand and market demand.
  • Explain the determinants of demand. 
  • Distinguish between a shift of and a movement along the demand curve.
  • Draw diagrams to show differences between movements along the demand curve and shifts of the demand curve.
Supply
  • Define 'supply'.
  • Draw a supply curve.
  • Explain the law of supply verbally and using diagrams.
  • Explain that the supply curve represents the relationship between the price and the quantity supplied of a product, ceteris paribus.
  • Describe the relationship between an individual producer's supply and market supply.
  • Explain the determinants of supply. 
  • Distinguish between a shift of and a movement along the supply curve.
  • Draw diagrams to show differences between movements along the supply curve and shifts of the supply curve.
Market equilibrium
  • Explain the concept of 'equilibrium'.
  • Explain, using diagrams, how demand and supply interact to produce market equilibrium.
  • Explain the concepts of 'excess demand' and 'excess supply'.
  • Analyse, using diagrams, how changes in the determinants of demand and/or supply result in a new market equilibrium.
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The price mechanism

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dEMAND AND THE DEMAND CURVE

The law of demand is a bummer

THE debate over the minimum wage, which, thanks to Barack Obama's state-of-the-union address, we appear to be having again, is a debate over the question of whether raising the price of something-low-skilled labour, in this case-will reduce demand for that thing.

Advertising may make people miserable, but it still has its uses

E VERY YEAR, as Americans polish off their Thanksgiving feasts, a particular genre of advertisement begins to air. The details vary, but the plot does not: one family member surprises another with the Christmas gift of a luxury car, often adorned with a cartoonishly large bow.

Too many fairs, not enough art

MOST of the greatest works of art are in museums-"prisons for art", as one frustrated dealer calls them. While contemporary artists can keep replenishing their market, earlier paintings, bronze sculptures, objets d'art, antiquities, medieval carvings, porcelain and antique jewellery were created by those now dead.

As price goes up, so does demand

Not many economic papers start with a quote that suggests the authors will "be assured immortality, professionally speaking, and rapid promotion while still alive." Here, it may just prove true.

The gap between supply and demand

Rex Features"PLEASE don't take your organs to heaven," reads the American bumper sticker. "Heaven knows that we need them here on earth." Last year more than 7,000 Americans died while awaiting an organ transplant-almost double the number of American soldiers killed in Iraq since 2003.

demand_lessons_1_and_2.docx
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How important is marketing in influencing consumer preferences?
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supply AND THE SUPPLY CURVE

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. " Adam Smith

  • Define 'supply'.
  • Draw a supply curve.
  • Explain the law of supply verbally and using diagrams.
  • Explain that the supply curve represents the relationship between the price and the quantity supplied of a product, ceteris paribus.
  • Describe the relationship between an individual producer's supply and market supply.
  • Explain the determinants of supply. 
  • Distinguish between a shift of and a movement along the supply curve.
  • Draw diagrams to show differences between movements along the supply curve and shifts of the supply curve.

Why there is a worldwide shortage of vanilla

VANILLA is one of the world's most popular spices and an important ingredient in products ranging from chocolate to perfume. But it is getting harder to find. Vanilla-rich foods like ice cream have been removed from shelves or become pricier. Chefs are making what they have go further.

An improbable global shortage: sand

INDIA'S "sand mafia" is doing a roaring trade. The Times of India estimates that the illicit market for sand is worth around 150bn rupees ($2.3bn) a year; at one site in Tamil Nadu alone, 50,000 lorryloads are mined every day and smuggled to nearby states.

supply_lessons_1_and_2.docx
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Faced with a housing crisis, California could further restrict supply

"THE rent is too damn high," read the signs brandished by tenant advocates at rallies held in late April in Oakland (median monthly rent: $2,950), Los Angeles (median monthly rent: $2,700), and Sacramento (median monthly rent: $1,895).

How supply can create its own demand

This week "The Economist explains" is given over to economics. Today's is the third in a series of six explainers on seminal ideas. IN THE depths of the Great Depression, more than a quarter of America's workers could not find employment. There was not enough demand for the goods and services they could supply.

Rigonomics

IN THE wilds of western Texas, a flicker of life has returned to the fracking, or hydraulic-fracturing, industry. In the past four weeks nine idled oil rigs have been put back to work in the Permian basin, the richest of America's shale-oil provinces.

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mARKET EQUILIBRIUM

vernon_smith_experiment.docx
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vernon_smith_experiment_2.docx
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vernon_smith_experiment.pptx
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market_equilibrium.docx
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MARKET EFFICIENCY

HOW: ANALYSE THE IMPACT OF A SODA TAX ON MARKET EFFICIENCY IN THE MARKET FOR SOFT DRINKS
WHY: TO UNDERSTAND HOW INTERVENTION IN THE MARKET CAN DISTORT MARKET EFFICIENCY

consumer_producer_surplus_ib_lesson.doc
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ASSESSMENT IN THE STYLE OF PAPER 1: Distinguish between a shift of the demand curve and a movement along the products demand curve (10 marks)

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economics_specimen_markscheme_hl_p1__1_.pdf
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Demand, Supply and market EQUILIBRIUM QUANTITATIVE (HL) Not part of new FE 2022 SYLLABUS

  • Explain and plot a linear demand function of the form Qd = a – bP.
  • Identify the slope of the demand curve as the slope of the demand function Qd = a – bP, that is '–b' (the coefficient of P).
  • Outline why, if the 'a' term changes, there will be a shift of the demand curve.
  • Outline how a change in 'b' affects the steepness of the demand curve.
  • Explain and plot a linear supply function of the form Qs = c + dP.
  • Identify the slope of the supply curve as the slope of the demand function Qs = c + dP, that is 'd' (the coefficient of P). 
  • Outline why, if the 'c' term changes, there will be a shift of the supply curve.
  • Outline how a change in 'd' affects the steepness of the supply curve.
  • Calculate the equilibrium market price and quantity using linear demand and supply functions.
  • Plot demand and supply curves from linear functions, and identify the equilibrium price and quantity.
  • Calculate the quantity of excess demand or excess supply from the above plotted graphs.
demand_function.docx
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Activity 1 - Developing your understanding of demand, supply and market equilibrium linear functions (HL)
Complete each of the booklets above so that you master the 
Activity 2 - Demonstrating your understanding of demand, supply and market equilibrium linear functions (HL)
Once you have completed the booklets you are going to create a brief film to demonstrate your learning:
You should include
  1. A market
  2. Both a demand and supply function
  3. Demonstrate Market Equilibrium
  4. Show how a non-price determinant (change in a+c) will effect the market equilibrium
  5. you should try to make the film as interesting as possible and show ALL Workings. 

Success CRITERIA:
You will have been successful if your film demonstrates your ability to:


  • Explain and plot a linear demand function of the form Qd = a – bP.
  • Identify the slope of the demand curve as the slope of the demand function Qd = a – bP, that is '–b' (the coefficient of P).
  • Outline why, if the 'a' term changes, there will be a shift of the demand curve.
  • Outline how a change in 'b' affects the steepness of the demand curve.
  • Explain and plot a linear supply function of the form Qs = c + dP.
  • Identify the slope of the supply curve as the slope of the demand function Qs = c + dP, that is 'd' (the coefficient of P). 
  • Outline why, if the 'c' term changes, there will be a shift of the supply curve.
  • Outline how a change in 'd' affects the steepness of the supply curve.
  • Calculate the equilibrium market price and quantity using linear demand and supply functions.
  • Plot demand and supply curves from linear functions, and identify the equilibrium price and quantity.
  • Calculate the quantity of excess demand or excess supply from the above plotted graphs.

(You can use Quicktime on a mac to record screen and narrations, if you're not sure how to do this please ask)
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