Banker's Blog

Sunday, June 8, 2014

The Law of Supply

The Law of Supply and the Supply Curve

Supply is slightly more difficult to understand because most of us have little direct experience on the supply side of the market. Supply is derived from a producer's desire to maximize profits. When the price of a product rises, the supplier has an incentive to increase production because he can justify higher costs to produce the product, increasing the potential to earn larger profits. Profit is the difference between revenues and costs. If the producer can raise the price and sell the same number of goods while holding costs constant, then profits increase.

The law of supply holds that other things equal, as the price of a good rises, its quantity supplied will rise, and vice versa. Table 2 lists the quantity supplied of rental videos for various prices. At $5, the producer has an incentive to supply 50 videos. If the price falls to $4 quantity supplied falls to 40, and so on. The figure titled "Supply Curve" plots this positive relationship between price and quantity supplied.

TABLE 2 Supply of Videos
Price	Quantity Supplied
$5	50
$4	40
$3	30
$2	20
$1	10

Supply is upward sloping because desired quantity supplied increases with price

A supply curve is a graphical depiction of a supply schedule plotting price on the vertical axis and quantity supplied on the horizontal axis. The supply curve is upward-sloping, reflecting the law of supply.

Source: http://www.econweb.com/MacroWelcome/sandd/notes.html#2

Saturday, June 7, 2014

The Law of Demand

The Law of Demand and the Demand Curve

We begin with demand because demand is usually easier to understand from our personal experiences. We are all consumers and we all demand goods and services. Demand is derived from consumers' tastes and preferences, and it is bound by income. In other words, given a limited income (whether it be $30,000 or $5 million), the consumer must decide what goods and services to purchase. Within his budget, the consumer will purchase those goods and services that he likes best. Each consumer will purchase different things because individual preferences and incomes differ.

The law of demand holds that other things equal, as the price of a good or service rises, its quantity demanded falls. The reverse is also true: as the price of a good or service falls, its quantity demanded increases. This law is a simple, common sense principle. Think of your trips to the grocery store. When the price of orange juice rises, for example, you buy less of it. When that item is on sale, you purchase more of it. This is all that we mean by the law of demand.

Table 1 lists the monthly quantity of rental videos demanded by an individual given several different prices. If the rental price is $5, the consumer rents 10 videos per month. If the price falls to $4, the quantity demanded increases to 20 videos, and so on. The figure titled "Demand Curve" plots the inverse relationship between price and quantity demanded.

TABLE 1 Demand for Videos
Price	Quantity Demanded
$5	10
$4	20
$3	30
$2	40
$1	50

Demand is downward sloping because desired quantity demanded falls when price increases

A demand curve is a graphical depiction of the law of demand. We plot price on the vertical axis and quantity demanded on the horizontal axis. As the figure illustrates, the demand curve has a negative slope, consistent with the law of demand.

Source: http://www.econweb.com/MacroWelcome/sandd/notes.html#1

Friday, June 6, 2014

Module

LUBS1940 Economics for Management
20 creditsClass Size: 300

Module manager: Dr Kevin Reilly
Email: ktr@lubs.leeds.ac.uk

Taught: Semesters 1 & 2 View Timetable

Year running 2014/15
Pre-requisite qualifications
Mathematics of at least GCSE grade B standard.
This module is mutually exclusive with

LUBS1950    Economic Theory & Apps 1

This module is approved as an Elective
Module summary
The aim of this module is to give students a grounding in basic economic theory as it applies to business. The concern of this module is developing the students ability to use the economic view of firms, markets and the economy in general in their decision making process.
Objectives
On completion of this module, students will be able to demonstrate:
- a clear understanding of basic economic principles relevant to the business firm and to the macro economic environment;
- an understanding of simple models used in micro and macro economic analysis;
- an ability to apply the main economic principles and models to business and management problems and to problems of market economics;
- an ability to interpret simple economic data relevant to the business firm and the market; and
- an understanding of the role of economic policy and institutions in the economy.

Learning outcomes
The aim of this module is to give students a grounding in basic economic theory as it applies to business. The concern of this module is developing the students ability to use the economic view of firms, markets and the economy in general in their decision making process.

Further information about the Business School is available on the website: Business School

Syllabus

- Basic theory of price and output
- The analysis of costs and pricing in private sector organisations
- The analysis of market structures
- The analysis of competition between firms
- The determination of the level of economic activity
- Macroeconomic issues (unemployment, inflation, etc) and policy
- International macroeconomics
Teaching methods

Delivery type    Number    Length hours    Student hours
Lecture    28    1.00    28.00
Seminar    7    1.00    7.00
Private study hours    165.00
Total Contact hours    35.00
Total hours (100hr per 10 credits)    200.00
Progress monitoring
Students will get direct feedback on their tutorial work from the tutors by working through answers in class and also from the answer sheets provided.

Tutorials will cover questions that reinforce the lecture material and provide feedback to the students on the correct answers from the four term tests.

Methods of assessment

Coursework
Assessment type    Notes    % of formal assessment
In-course MCQ    Four 30 minute term tests. The final mark will be the highest mark achieved from: (A) The three highest marks obtained on the four 30 minutes term tests (10 percent of final mark for each of the counted tests) plus a three hour final exam (70 percent of final mark); or (B) One three hour examination (100 percent of final mark).    30.00
Total percentage (Assessment Coursework)    30.00

Exams
Exam type    Exam duration    % of formal assessment
Unseen exam (MCQ, essays, etc.)    3 hr 00 mins    70.00
Total percentage (Assessment Exams)    70.00
Reading list
The reading list is available from the Library website

Last updated: 23/04/2014

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