The market is similar to weather. They are always unpredictable, and storms appear and subside from time to time. They are both complex and attractive. Just like studying the weather, after studying the market carefully, we will find that there seems to be some certain factors and mechanisms hidden behind the random movement. The basic tool to explore the law of single market price and output is supply and demand analysis. Take the price of gasoline as an example. What is the mechanism behind the sharp fluctuation of international and domestic gasoline prices in recent years? There is a very powerful tool in economics, called supply and demand theory, to answer such questions and many other changes in the economic environment. This theory explains how consumer preferences determine the consumption demand of goods. At the same time, how does enterprise cost become the basis of commodity supply? The increase in gasoline prices is either due to the increase in gasoline demand or the decrease in oil supply. This is true in every market, from computers to precious stones to land. The change of supply and demand leads to the change of output and price. If you can understand how supply and demand work, then you can understand many phenomena in the market, such as the government's minimum purchase price of grain and tax increase on commodities ... This chapter introduces the concepts of supply and demand, and explains their functions in a single commodity competition market. Let's discuss the demand curve first and then the supply curve. With these basic tools, we will see how the market price is balanced by the intersection of two curves-here is the power of demand and supply. Write what you need to master in this chapter. 1. Concept of demand and supply and demand theory. 2. Determination of market equilibrium. 3. The influence of various factors on the market equilibrium. Demand analysis serves two main management objectives. First, it provides the necessary insight for effective demand management. Secondly, it helps to forecast sales and income. Section 1 Requirements 1. Demand demand refers to the quantity of goods that consumers are willing and able to buy under certain market conditions in a certain period of time, which reflects the corresponding relationship between market conditions and consumers' willingness to buy. There are two conditions for the formation of demand, one is that consumers have the desire to buy the goods, and the other is that consumers have the ability to pay. Simply put, demand is consumers' desire to have the ability to pay corresponding to the price in a certain period of time. A certain period of time generally refers to a certain market situation in a year, which refers to the factors that affect demand, such as product prices, consumer income, consumer hobbies and so on. Another way to understand demand is as follows: 1 is not only subjective, but related to market price. 2. Demand is willingness, not actual purchase. 3. This variable is flow, not inventory, so demand is related to cycle. Other things being equal, there is a certain relationship between the market price of an article and the demand for it. This relationship between price and demand can be expressed by demand table or demand curve. Pindick 2 Second, the demand table and the demand curve demand table are the simplest forms to explain the demand relationship. It is a table that lists the price of a commodity and the corresponding demand of some individuals or groups for the commodity at this price. Table 2- 1 simplified demand table Yu-xing washing machine Figure 2- 1 washing machine demand curve demand relationship can also be expressed graphically. The usual practice is to mark the demand quantity on the horizontal axis and the price level on the vertical axis. The relationship between the sales volume and the price of Royal Star washing machine can also be expressed by the following demand curves: personal demand curve and market demand curve. Everyone's spending decision determines their demand for a given commodity. The market demand curve of a commodity is equal to the sum of individual demand. Because the market demand curve is the basis for making many price and output decisions, manufacturers are more interested in market demand than individual demand. Analysis of personal needs is steep and the market is flat. The reason further explains the different requirements names. The total social demand of commodities refers to the social demand for all commodities. Because the enterprise's demand for goods is the demand for enterprise products at a certain price in a certain range in a certain period of time under the same other conditions. Royalstar washing machine price RMB/set Royalstar washing machine sales Taiwan/month15000130001200010000 9000 6000 3000 20001500 5/kloc-0. Consumer 2: 6 6 6 price yuan in the whole market price yuan price yuan price yuan Q 1Q2 Q40206000 price p demand q1500010000 5000 0001530 5080 mbaqpii01. That is the market demand of a commodity. The commodity demand of all industries constitutes the first correspondence of the total commodity demand of the whole society. Spontaneous demand and derived demand. The demand for food, clothing and housing is spontaneous. The demand for means of production belongs to derivative demand. Short-term and long-term needs. Christmas cards, moon cakes. Short-term demand depends on the price of goods, the price of substitutes, the current disposable income of consumers, the adaptability of consumers to styles and the sensitivity to advertisements. Long-term demand depends on the availability promotion activities of long-term income trend substitutes. Third, the demand function The generalized demand function refers to the mathematical expression of the relationship between demand and factors affecting this quantity. On many occasions, demand function refers to the functional relationship between demand and commodity price when other variables keep a certain level. The quantitative relationship between demand and demand factors reflected by demand expressed in mathematical language is the demand function. Q-consumer's demand for a commodity P-market price of the commodity Ps-market price of substitutes PC-market price of complementary products I-consumer's income level A- advertising expenditure and other marketing expenditure AC- competitor's advertising expenditure on the commodity or service Cp-consumer's interest and preference for the commodity Pe-expected price change TA of the commodity. Adjustment time T/S- tax or subsidy-other factors affecting commodity demand replace commodities-assuming that all other factors affecting demand remain unchanged, if the demand of one commodity rises and falls when the price of another commodity rises and falls, then these two commodities are substitutes. In other words, if two commodities are mutually substitutable, the increase in the price of one commodity will increase consumers' demand for another commodity, and vice versa. For example, as the price of pork rises, more people will reduce the consumption of pork and increase the consumption of beef. Another example is complementary commodities such as apples and pears, butter and margarine-assuming that all other factors affecting demand remain unchanged, if the demand of one commodity also drops when the price of another commodity rises and falls, then the two commodities are complementary. If two commodities are complementary commodities, the price increase of one commodity will reduce consumers' demand for the other commodity, and vice versa. For example, tape recorders and tapes-tape recorders and tapes are used together, other conditions remain unchanged. The increase in the price of tape recorders will reduce the demand for tapes. Another example is cameras and film. A few years ago, when DVD was first listed in 2000, on the one hand, the price was much higher than that of VCD; on the other hand, because the pirated market was mainly a demand function, it explained the relationship between the order of magnitude of a commodity or service that consumers were willing to buy in a certain period of time and a series of established conditions that affected consumers' willingness to buy, including price, income level and advertising. Pindick T/saepcsdtpcnaippq 4 vcd movies and DVDs are few, so the sales of DVD players are not very good. Now the situation is just the opposite. Ask students to illustrate the demand function of substitutes and supplements with examples. Example 1 textbook P33 example 2 the market demand of rear projection TV and the function of its price and per capita disposable income ipqd 5.225005438+05000 p- stands for the price of rear projection TV I- per capita disposable personal income. As can be seen from the formula, the demand for rear projection TV is inversely proportional to its price and directly proportional to its income. Most rich people's living rooms are very stylish about rear projection TV-this is the wallet to be discussed later. Fourth, the law of demand Generally speaking, the higher the price, the less willing consumers are to buy, and the lower the price, the more willing consumers are to buy. This opposite change or negative relationship between price and demand is usually called the law of demand. Economists have found that there are two basic reasons for the formation of the law of demand-income effect and substitution effect, which are explained by Figure 2- 1-that there is an inverse relationship between the demand of goods and their prices when the demand conditions remain unchanged. The demand curve is inclined to the lower right with a negative slope. The decrease of P↓ will cause the increase of Q↑. Income effect A decline in the price of a commodity, such as steak, has the effect of increasing the real income or purchasing power of consumers. This is the income effect. For example, beef per catty 15 yuan, two catties a week need 30 yuan. Now if beef is per catty 13 yuan, you need 26 yuan for two catties a week. 4 yuan represents the increase in real income in 4 yuan. Now that deflation is over, the actual situation is that the price of beef has gone up, and we will find ourselves poorer than before. For another example, if the price of gasoline doubles, we can only have lower real income, and naturally we have to cut down on the consumption of gasoline and other items. Substitution effect As a result of the falling price of a commodity, rational consumers can increase their utility by buying more of this commodity with falling price and less of other commodities. This is the substitution effect. To sum up, due to the income effect and substitution effect, price decline will always have an impact on demand. For normal commodities with increased income and preference, both substitution effect and income effect require an increase in demand when prices fall. A case of the law of demand-the amazing development of computer demand. We can take personal computers as an example to illustrate the downward trend of demand. In the early 1980s, computers were extremely expensive and had limited computing power. Only individual enterprises and families can afford this cost. Nowadays, owning a computer is very common. Most people here probably have a computer. If you don't finish your thesis, it will be very difficult. Even if you are typing and printing, you may not get good grades. Figure 2-3 is the demand curve between the price and demand of computers and their peripherals officially counted by the United States. In the past 20 years, the price of computers has dropped sharply, attracting new buyers. So more and more people must be able to buy computers, which are widely used for work, study and entertainment. With the development of Internet, computers are playing an increasingly important role, and more and better people are trying to catch up with the trend. By 1999, the global sales of personal computers had exceeded 1 100 million, and now there are more. As can be seen from the figure, with the development of software and the wide application of Internet, e-mail and other technologies, the price of computers is obviously decreasing, but the output is increasing at an alarming rate. ? Normal goods and low-grade goods will increase consumers' demand for a certain product or service when their income simply increases. We call this commodity ordinary. When consumers' income increases, the demand for certain products or services will decrease. We call this commodity low-grade goods. This will be explained in detail in later chapters. V. Factors Affecting Demand The factors influencing demand behind the demand curve are the price of the commodity itself, the income of consumers, the prices of related commodities, supplementary commodities and substitute commodities, consumers' preferences and consumers' expectations. 1. The price demand law of the commodity itself. The demand of a commodity is inversely proportional to its own price. This is the most important and sensitive factor affecting demand. Generally speaking, the higher the price, the less willing consumers are to buy, and the lower the price, the more willing consumers are to buy. Case Study One of the environmental problems facing the United States is how to deal with the large amount of garbage produced by families and businesses every day. 1960, the average amount of garbage in the United States was 2.6 pounds per day, but today, the figure is 3.6 pounds. With the increase of garbage, it is more and more difficult to find a new garbage dump near the city. A small community uses the law of demand to alleviate the problem of garbage collection. 1987, the residents of Boccaccio, Pennsylvania each paid a fixed garbage fee of 120 to the municipal authorities every year. At that time, the garbage they threw away each day was 2 yuan. 1988 began to change the charging method. The requirement of the municipal authorities is that all garbage should be put in the special garbage bags they sell. A 40-pound garbage bag costs $65,438 +0.5, and the marginal cost for residents to throw away garbage increases from zero to about 4 cents per pound. In this way, in the first year, the garbage discarded by each person every day was reduced to less than pounds, the residents here could pay 30 less each year, and the cost of garbage collection by the municipal authorities was also reduced by 40 boxes in Wuhan. The water price in Wuhan is charged in a trapezoidal way of 65438+5020t, and that in 0.5 yuan is charged at 12t, which can save water on the whole, because it is obviously not binding to advocate a conservation-oriented society only by social morality, and it must play a more effective role through the price lever of the market. 2. The income level of consumers here refers to the average income level of consumers. Generally speaking, demand and consumer income change in the same direction, that is, income growth will bring demand growth, consumer income level will decrease and demand will decrease. This is only for normal goods. People's demand for so-called low-end goods decreases with the increase of income, such as black-and-white TV sets. Explain the relationship between income and demand of four commodities, daily necessities and normal commodities. Food, cooking oil, fuel, matches, minimum clothing and housing. With the increase of income, the demand for the quality and quantity of daily necessities will increase, but this demand will rise to a certain limit. Relationship between income and demand of low-grade goods. When the income exceeds a certain level, the demand will drop sharply. For example, the relationship between income and demand of hamburger product Dick P95, high-end consumer goods and luxury goods. Jewelry. This will be introduced in detail in the later chapter "Demand Elasticity". 3. Prices of related commodities and substitutes. If product Y and product X are substitutes for each other, it means that they have similar uses for consumers and can be used interchangeably, such as pork and beef, coffee and tea. There is a positive correlation between substitutes. When the price of 6 Y product rises, people will shift their demand to X product, which will increase the demand of X product, and vice versa. So the demand of a product and the price of its substitute change in the same direction. Complementary price. If product Y and product X are complementary, that is to say, only when they are used together can they play their respective roles better. Such as DVD and DVD discs, cameras and films, cars and tires. There is a reverse correlation between complementary products. The increase in the price of Y product will cause the decrease in the demand of Y product, which will also cause the decrease in the demand of X product. On the contrary, the decline in the price of Y product will lead to an increase in the demand for X product. For example, in previous years, the price of DVD discs was very high, generally above 25 yuan, and the quantity was relatively small. At that time, the price of VCD discs was only around 8 yuan. Later, the variety of DVD discs increased, and the price dropped to 7 yuan now. VCD discs were exported to the market, and the demand for DVD players increased. Therefore, the demand for a product changes in the opposite direction to the price of its complementary product. The complementary strategy between GM and Intel: identifying, developing and managing the relationship between complementary products to increase the demand for their own products has become a key part of the company's strategy. The other five competitive forces are more difficult to deal with. In order to eliminate the competition of substitutes, we must catch up with new imitators endlessly, and it is difficult to provide sustainable competitive advantage. Effective cooperation with competitors often violates the US antitrust law 1. Establishing permanent barriers to entry requires the best product differentiation advertising and relationship marketing. After the coordination of vertical integration and the improvement of total quality management, the power that buyers and suppliers still hold is often beyond the control of manufacturers. So now many companies are trying to develop the driving force of complementary product demand. General Motors General Motors has expanded its ability of high-end auto loans and special auto insurance through a large amount of investment. GM does this not because they are more profitable assets, but because it reduces the time and inconvenience of arranging these loans, because such loans and insurance have a strong complementary relationship with the very profitable sales of "suburban people", Cadillac and other luxury cars and trucks. Similarly, Intel's engineers who design computer chips now generally exceed the demand for chip speed and computing power in current personal computer applications. Therefore, Intel and ProShare set up a joint venture to accelerate the development of cheap video interactive or video equipment, desktop video conferencing facilities and videophones. The new complementary technology needs bigger and faster computer chips. 4. Consumers' interest and preference for goods. Preference depends on social and cultural customs, social lifestyle and habits, religion, climate and a country's resource endowment. Chinese food and western food. This mainly refers to people's preference and choice of products. For example, a style of clothing is very popular, because many people like it, so there is a great demand. A tape recorder with high quality and novel structure sells well because many people would rather buy it than other similar products with poor quality and outdated structure. People's hobbies and choices are also related to people's habits. For example, in our country, people are not used to drinking coffee. The demand for coffee is small, but the demand for tea is great. This is because China residents generally have the habit of drinking tea. People's hobbies and choices are not fixed, so it is necessary to study this change frequently to improve old products and develop new products according to this change. Only in this way can people always maintain a high demand for products. Quality and function of commodities. Demonstration effect and mutual comparison behavior. 5. Investment opportunities such as consumers' expected price, expected supply, expected income and expected deposit interest rate. People's expectations of the future price of products will also affect the demand for products. Generally speaking, if the price is bullish, the demand will increase; if the price is bearish, the demand will decrease. 1988, there is a "snapping up wind" in China. The reason is that consumers expect products to increase in price and want to buy more before the price increase, which leads to a sharp increase in demand for some necessities. The most typical example is the price game between automobile consumers and automobile manufacturers in the past two years. People's expectations of car prices are generally declining, so car prices are declining every year, demand is also affected, and the inventory is very large. 1 anti-monopoly law 7 6. Advertising and other marketing expenses. The function of advertising is to convey the information of commodities to potential consumers, show the competitive advantages of commodities themselves, influence consumers' choice of competitive products and establish brand loyalty. ④ Establish fashion and change preferences. The advertising expenditure of competitors on this product will affect people's hobbies and choices of products. Generally speaking, the greater the advertising cost, the greater the demand for products. But there is a reasonable limit here. At first, increasing the investment in advertising fees will increase the demand for products. However, when the advertising fee increases to a certain extent, the increase in demand brought by the increase in unit advertising fee will decrease. It is not necessarily cost-effective to increase advertising fees at this time. Take Kongfujiajia Liquor (199) as an example. The advertisement on CCTV is the king, because of the high advertising cost and excessive financial cost, it has suffered a loss. 7. Credit Cost and Credit Policy Consumer-oriented credit will encourage consumers to make more purchases. As mentioned above, example 8 of GM's luxury car sales loan. The length of time the goods are used. The demand characteristics of non-durable goods meet the current demand, and the services provided are short-term. Such as food, Christmas tree, all services. Durable goods are goods that can provide services for their owners in the future. The demand for durable goods is characterized by long-term use, the impact of inventory and the delay in purchase. Increase the maintenance of existing durable consumer goods or just extend the service life of old models. The demand for durable goods fluctuates greatly. Case study: The following aspects should be considered in computer purchase decision: whether new products will make my computer obsolete soon, whether my income is sufficient and stable to pay for this computer, whether the price may go up or down next year, and whether I can get enough software support. 9. Population changes, population quality, population age structure, population size, demand for bicycles, watches and other commodities are related to population. 10. exchange rate factors in addition to the above-mentioned determinants of demand, the demand for goods traded in foreign markets will also be affected by external factors such as exchange rate changes. When Microsoft sells computer software overseas, it prefers buyers to pay in dollars. This is because companies like Microsoft spend very little overseas except advertising, so it is impossible to make ends meet with foreign currency. If Microsoft accepts Italian lira, French franc or RMB when selling software. It will also introduce an exchange rate risk, and if Microsoft wants to compensate for this risk, it will have to raise the price of its software. Therefore, Microsoft's exports generally use dollar trading wells to closely link the dollar price with the prices of other currencies. When the US dollar appreciates, overseas buyers have to pay more domestic currency to get the US dollars for purchasing Microsoft software, which reduces the demand. Similarly, the depreciation of the dollar has lowered the price of lira or francs and increased the demand for Microsoft software. China's software market is chaotic, with more piracy. Generally speaking, families in China are unlikely to buy genuine Microsoft software, so the impact of exchange rate is small. 1 1. Taxes or subsidies will increase the price of goods due to taxes. Later, it is necessary to analyze who will pay for the tax increase, and its demand will decline. Increasing government subsidies will increase demand. The above are just the general factors that affect product demand. Different products usually have special factors that affect demand. For example, the demand for rain gear, beer, air conditioning and other commodities is related to the season. 8 Factors affecting the demand curve-Taking automobiles as an example, the average income is 1. When income increases, people will buy more cars. For example, college teachers and graduate students in the 1990s were reluctant to stay in Shenzhen. Population growth has increased the purchase of cars. 3. China is the last automobile market and automobile consumption country. The increase of gasoline price reduces the demand for cars. Health 4' s preference for owning a new car has become a symbol of social status 5' s special factors, including the availability of other modes of transportation and the safety of cars. 6 Price Expectation People's expectation of future car price decline is in line with the international market, and the demand for cars is decreasing. 7 The appreciation of RMB makes the demand for imported cars rise. 8 Others, please consider speaking, interactive teaching factors, expected effect, price fluctuation of substitute products, price fluctuation of Ps supporting products, income level fluctuation of Pc consumers, I consumers' preference for this product, Cp's expected future price fluctuation, PE's consumer number fluctuation, N's demand Q's increase and decrease, and demand Q's increase and decrease. Demand q increases and decreases demand q increases and decreases demand q increases and decreases demand q increases and decreases VI. Demand and demand change demand quantity change demand When the price changes, the purchase quantity moves along the demand curve.