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Supply and Demand - Coggle Diagram

- - - - Utility can be quantified
      - Consumers are rational
      - Goods and services are homogenous
  - - - Inferior goods: Income increase, demand lesser
      - Normal goods: Increase income, increase demand
      - An increase in consumer income causes a rightward shift in DD curve
    - - Substitutes
        
        E.g. Margarine and Butter
        
        Both satisfies similar wants
        
        When one's DD shifts right, the other DD shifts left
      - Complements
        
        E.g. Cars and petrol
        
        To satisfy the consumer's want for a product, it comes with another product
        
        When one's DD shifts right, the other DD shifts right
    - - E.g. Motor cars and Steel
      - An increase in DD for a good will producers of the good to want more FOP, increasing FOP's DD
      - When one's DD shifts right, the other DD shifts right
    - - If a consumers expects the price of goods to decrease in the future, he will cut down on his spenditure now
      - When consumers expect a cheaper price in the future, DD shifts left
    - - When a product is to the consumer's preference, DD shifts right
    - - New govt rules may cause an increase/ decrease in demand
    - - More even income distribution, DD shift right
    - - An increase in population will result in more people requiring more of a good
      - When population increase, DD shift right
    - - E.g. Housing loans
      - If the interest of hire purchase finances increase, people less willing to take out a loan
      - An increase in cost of HPF, DD shifts left
      - An increase in availability of HPF, DD shift right
- - - - Profit Motive: With an increase in price, the profit increases, thus consumers will want to produce more
      - Production Costs: When producing more, marginal cost increases, thus needs an incentive to produce more
      - New Entrants into the Market: More firms = more supply
  - - - Competitive
        
        E.g. Wheat and Corn. A drop in SS of corn will make consumers use the same FOP to produce Wheat, SS of Wheat increase
        
        They use the same FOP, cannot grow both at the same time
        
        When the SS of one decreases (usually due to demand change), the SS of other good increases
      - Joint Supply
        
        When the increase in production of a good leads to an increase in another good
        
        E.g. Beef and Hide. When SS of beef increase, more cows slaughtered, concurrently increasing hide collected, SS increases
        
        When the SS of one increases (usually due to demand change), the SS of other good increases
    - - When the cost of production of a product decreases, the SS increases
      - E.g. Wages, FOP price
    - - Indirect Taxes
        
        Taxes decreases supply (may have a pivotal shift, depending on type of tax: % or flat)
      - Subsidies
        
        Producers more willing and able to sell at lower price
        
        Subsidies increases supply
    - - Increase tech, SS increases
    - - Can be good or bad: Rain may destroy crops or improve yield
      - Worse weather conditions, SS decrease
    - - If producers are expecting price increase in the future, will stock up and sell less now
      - When producers expect price to increase in the future, SS decreases now
- - - - A change in price due to demand signals to producers to produce more