What Were Some Of The Critical Changes That Fort Worth Officials Identified To Decrease Costs?

Department 01: Supply and Demand

Supply and Demand

Teach a parrot the terms of 'supply and demand' and y'all've got an economist.
-- Thomas Carlyle

A market brings together and facilitates trade between buyers and sellers of a good or services. These markets range from bartering in street markets to trades that are made through the internet with individuals effectually the earth that never take met confront to face.

A market consists of those individuals who are willing and able to purchase the particular proficient and sellers who are willing and able to supply the good. The market brings together those who demand and supply the good to determine the price.

For case, the number of many apples an individual would be willing and able to purchase each month depends in part on the price of apples. Assuming merely price changes, then at lower prices, a consumer is willing  and able to purchase more apples. Equally the toll rises (over again holding all else abiding), the quantity of apples demanded decreases. The Police force of Demand captures this human relationship between price and the quantity demanded of a product. It states that there is an inverse (or negative) human relationship between the price of a good and the quantity demanded.

Demand Bend

Call up, that we represent economic laws and theory using models; in this case we can use a demand schedule or a demand curve to illustrate the Law of Demand.  The demand schedule shows the combinations of price and quantity demanded of apples in a table format.  The graphical representation of the demand schedule is chosen the need bend.

When graphing the demand bend, price goes on the vertical axis and quantity demanded goes on the horizontal centrality. A helpful hint when labeling the axes is to remember that since P is a tall letter of the alphabet, it goes on the vertical axis. Another hint when graphing the demand curve is to recall that need descends.

The demand curve reflects our marginal benefit and thus our willingness to pay for additional amounts of a good.  It makes sense that our marginal do good, or willingness to pay for a good, would turn down every bit we consume additional units because we go less additional satisfaction from each successive unit consumed. For example, at lunch time you make up one's mind to buy pizza past-the-piece.  Y'all'd be willing to pay a lot for that first piece to satisfy your hunger.  But what virtually the second piece?  Perhaps a little less.  If we keep considering each additional piece, we might ask what the 3rd, 4th or 5th piece is worth to you lot.  By that betoken, you'd be willing to pay less, maybe much less.  The law of demand and our models illustrate this behavior.

A more formal test of the law of demand shows the virtually basic reasons for the downward sloping nature of demand. The offset is the substitution issue which states that as the toll of the adept declines, it becomes relatively less expensive compared to the price of other  goods and thus the quantity demanded is greater at a lower toll. When the cost of the good rises, the opposite occurs; that is, equally the price of the good becomes relatively more than expensive compared to other appurtenances a lower quantity will be demanded. For example, as the price of apples increases or decreases, apples go relatively more than or less expensive compared to other appurtenances, such equally oranges. Thus if the price of apples declines, consumers will purchase more apples since they are relatively less expensive compared to other goods, such as oranges.

The 2nd factor is the income upshot which states that every bit the price of a good decreases, consumers become relatively richer.  Now, their incomes have not increased, merely their buying power has increased due to the lower price.  If they continued to buy the same amount, they would accept some coin left over - some of that extra money could be spent on the skilful that has the lower price, that is quantity demanded would increase.  On the other hand, as the cost of a good increases, then the buying ability of individuals decreases and the quantity demanded decreases. For example, at 20 cents per apple, we are able to purchase 5 apples for $1 but if the price falls to 10 cents, we would exist able to buy ten apples for $1. Although our income has not inverse, we have become relatively richer.

At this bespeak, we take explained why there is an changed relationship between toll and quantity demanded (i.e. we've explained the law of demand).  The changes in cost that we have discussed cause movements forth the demand bend, chosen changes in quantity demanded. Merely there are factors other than cost that cause complete shifts in the need bend which are called changes in demand (Annotation that these new factors also determine the actual placement of the demand bend on a graph).

While a change in the cost of the good moves u.s.a. along the demand bend to a different quantity demanded, a change or shift in demand volition cause a dissimilar quantity demanded at each and every price. A rightward shift in demand would increase the quantity demanded at all prices compared to the original demand curve.  For example, at a price of $twoscore, the quantity demanded would increase from twoscore units to 60 units. A helpful hint to remember that more than demand shifts the demand curve to the right.

A leftward shift in demand would decrease the quantity demanded to 20 units at the cost of $40. With a decrease in demand, there is a lower quantity demanded at each an every cost along the demand curve.

Factors of Demand

A alter in tastes and preferences will crusade the demand curve to shift either to the right or left. For example, if new research found that eating apples increases life expectancy and reduces illness, then more than apples would be purchased at each and every toll causing the need curve to shift to the right. Companies spend billions of dollars in advertising to try and change individuals' tastes and preferences for a product.  Celebrities or sports stars are often hired to endorse a product to increase the demand for a production.  A leftward shift in demand is caused by a factor that adversely effects the tastes and preferences for the good. For example, if a pesticide used on apples is shown to take adverse wellness effects.

Another factor that determines the demand for a skilful is the price of related goods. These can be broken down into ii categories – substitutes and complements. A substitute is something that takes the place of the good. Instead of buying an apple, one could buy an orangish. If the price of oranges goes up, we would expect an increase in demand for apples since consumers would move consumption abroad from the higher priced oranges towards apples which might be considered a substitute good. Complements, on the other hand, are goods that are consumed together, such as caramels and apples. If the price for a expert increases, its quantity demanded volition decrease and the demand for the complements of that good will as well decline.  For case, if the toll of hot dogs increases, one will buy fewer hot dogs and therefore demand fewer hot dog buns, which are complements to hot dogs.

Think that demand is fabricated up of those who are willing and able to purchase the practiced at a particular price. Income influences both willingness and ability to pay.  Equally one'due south income increases, a person's ability to purchase a good increases, but she/he may not necessarily want more. If the demand for the expert increases as income rises, the good is considered to be a normal expert. Most goods fall into this category; nosotros want more than cars, more than TVs, more boats every bit our income increases. As our income falls, we also need fewer of these goods. Inferior goods have an inverse relationship with income. As income rises we demand fewer of these appurtenances, but as income falls we need more of these goods. Although individual preferences influence if a good is normal or inferior, in general, Top Ramen, Mac and Cheese, and used vesture autumn into the category of an inferior good.

Another factor of need is future expectations. This includes expectations of hereafter prices and income. An individual that is graduating at the end of the semester, who has simply accepted a well paying job, may spend more than today given the expectation of a higher future income.  This is especially true if the job offer is for more income than what he had originally anticipated.  If one expects the price of apples to go up side by side week, she will likely buy more apples today while the price is however low.

The last factor of demand is the number of buyers. A competitive market place is fabricated up of many buyers and many sellers. Thus a producer is not particularly concerned with the demand of one private but rather the demand of all the buyers collectively in that market.   As the number of buyers increases or decreases, the demand for the good will change.

The marketplace demand is determined by the horizontal summation of the individual demands. For example, at twenty cents per apple, Kelsey would buy eighteen apples, Scott would buy 6 and Maddie would buy 18, making the market quantity demanded at xx cents equal to 42 apples.

When determining the market demand graphically, nosotros select a price then find the quantity demanded past each individual at that cost. To determine the entire demand bend, we would then select another cost and echo the process.

Demand vs. Quantity Demanded

At this point, it is important to re-emphasize that there is an important distinction betwixt changes in demand and changes in quantity demanded. The entire curve showing the various combinations of price and quantity demanded represents the demand curve. Thus a change in the toll of the adept does non shift the curve (or change demand) but causes a movement along the demand curve to a unlike quantity demanded. If the cost returned to its original price, we would return to the original quantity demanded.

If the cost were originally $60, the quantity demanded would be 40 units. An increase in the price of the good to $80 decreases the quantity demanded to 20 units. This is a movement forth the demand bend to a new quantity demanded. Note that if the price were to return to $60, the quantity demanded would also return to the forty units.

A shift or alter in demand comes well-nigh when there is a different quantity demanded at each price. At $60 we originally demanded twoscore units. If there is a lower quantity demanded at each price, the need curve has shifted left. Now at $60, at that place are only 20 units demanded. Shifts in demand are caused by factors other than the cost of the practiced and, equally discussed, include changes in: ane) tastes and preferences; ii) price of related goods; 3) income; four) expectations about the futurity; and v) market size.

The demand for an input or resource is derived from the demand for the practiced or service that uses the resource.  We do not value steel in and of itself, merely since we need cars, we indirectly demand steel. If the demand for cars increases, this would crusade an increment in the need for the steel that is used to make the cars.

Practice

Identify how each of the post-obit would change the demand (shift right, shift left, move along).

Marketplace	Particular
ane. Oranges	A new diet consisting of eating six oranges a solar day becomes the latest diet fad.
two. Cars	Consumers' income rises.
3. Cars	The price of gasoline doubles.
4. Gym memberships	The price of personal practice equipment increases.
five. Shoes	The number of shoe manufacturers increases.
6. Arthritis medication	The number of elderly citizensincreases.

Answers: 1. D-right 2. D-right 3. D-left iv. D-right five. Along half dozen. D-correct

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Section 02: Supply

Supply

Supply shows the amount that producers are willing and able to supply to the market at each given cost. Producers must receive a cost that covers the marginal toll of production.  As the price of the good rises, producers are willing to produce more than of the good fifty-fifty though in that location is an increasing marginal cost.

If you were offered a job doing data entry this semester and could work every bit many hours every bit you lot wanted, how many hours per calendar week would you lot work at minimum wage? The answer to this would be based on your opportunity cost. What would you have to give up – social fourth dimension, written report time, or another job?

An private may be willing to work a few hours at a low wage since the value of what they are sacrificing is relatively low.  As the wage rate rises, individuals are typically willing to work more than hours since the marginal benefit becomes greater than or equal to the marginal cost of what has to be sacrificed.  At some betoken, many students would choose to drop out of school for the semester since the marginal benefit is greater than the marginal cost. Many stars and celebrities never attend college or drop out since the income that they would be foregoing at that time in their lives, exceeds the increase in their earnings potential of attending school.

The climate and soils of Idaho permit it to grow some of the all-time potatoes in the world. At a given cost, farmers are willing to supply a certain number of potatoes to the market. Since farmers have already used their state best suited for murphy production they take to utilise country that is less suitable to spud production if they desire to grow more potatoes. Since this state is less suited for potato product, yields are lower and the cost per hundredweight of potatoes is greater.  Equally the price of potatoes increases, farmers are able to justify growing more than potatoes fifty-fifty though the marginal cost is greater.

Similar to the demand curve, a movement along the supply bend from point A to betoken B is chosen a change in the quantity supplied.  Changes along the supply curve are caused by a modify in the price of the expert.  Every bit the price of the apples increases, producers are willing to supply more apples.

A shift in the supply curve (for example from A to C) is caused past a gene other than the price of the good and results in a different quantity supplied at each price.

Factors that Shift the Supply Curve

The factors listed below volition shift the supply curve either out or in.

1. Resources cost

If the price of crude oil (a resource or input into gasoline production) increases, the quantity supplied of gasoline at each price would decline, shifting the supply curve to the left.

2. Technique of production

If a new method or technique of production is developed, the cost of producing each good declines and producers are willing to supply more at each price - shifting the supply bend to the right.

three. Prices of other goods

If the price of wheat increases relative to the toll of other crops that could be grown on the same land, such as potatoes or corn, so producers will desire to abound more wheat, ceteris paribus. By increasing the resources devoted to growing wheat, the supply of other crops will reject. Appurtenances that are produced using similar resources are substitutes in production.

Complements in production are goods that are jointly produced. Beef cows provide non only steaks and hamburger just as well leather that is used to make belts and shoes.  An increase in the price of steaks will cause an increase in the quantity supplied of steaks and will likewise crusade an increase (or shift right) in the supply of leather which is a complement in production.

4. Taxes & Subsidies

Taxes and subsidies impact the profitability of producing a expert. If businesses take to pay more taxes, the supply curve would shift to the left. On the other mitt, if businesses received a subsidy for producing a good, they would be willing to supply more of the good, thus shifting the supply curve to the right.

5. Cost Expectations

Expectations almost the future toll will shift the supply. If sellers conceptualize that home values will decrease in the future, they may choose to put their house on the market today earlier the price falls. Unfortunately, these expectations often become self-fulfilling prophecies, since if many people think values are going downwardly and put their business firm on the market today, the increment in supply leads to a lower price.

vi. Number of sellers

If more companies first to make motorcycles, the supply of motorcycles would increase. If a motorcycle visitor goes out of business, the supply of motorcycles would turn down, shifting the supply curve to the left.

7. Supply Shocks

The terminal gene is often out of the hands of the producer. Natural disasters such as earthquakes, hurricanes, and floods bear upon both the product and distribution of appurtenances.  While supply shocks are typically negative, there can exist beneficial supply shocks with rains coming at the ideal times in a growing flavor.

Shifts in the Supply

To recap, changes in the price of a good will result in movements along the supply curve chosen changes in quantity supplied.  A change in any of the other factors we've discussed (and listed above), will shift the supply curve either right or left. The resulting movements are called changes in supply.

Practice

Identify how each factor will shift the supply curve: right, left, or move along.

Market	Change
1. Computers	Price of memory fries decreases.
2. Airline Tickets	Government imposes a new jet fuel tax.
3. Milk	Demand for milk increases.
4. Homes	Potential sellers expect home prices to turn down in vi months.
5. Cars	A new engine design reduces the toll of producing cars.
vi. Corn	The cost of wheat (a substitute in production increases in price).
7. Oranges	A freeze in Florida kills 25% of the orange ingather.

1. Southward-Right 2. S-Left three. Along-Greater Q iv. S-Right five. S-Right 6. S-Left 7. S-Left

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Department 03: Equilibrium

Market Equilibrium

A marketplace brings together those who are willing and able to supply the good and those who are willing and able to purchase the proficient. In a competitive market place, where in that location are many buyers and sellers, the price of the expert serves as a rationing mechanism.  Since the demand bend shows the quantity demanded at each toll and the supply curve shows the quantity supplied, the signal at which the supply bend and demand curve intersect is the point at where the quantity supplied equals the quantity demanded. This is call the market equilibrium.

Consumer Surplus and Producer Surplus

At the terminal unit purchased, the cost the consumer pays (their marginal toll) is equal to what they were willing to pay (the marginal benefit). The previous units purchased actually price less than what consumers were willing to pay. This divergence between the need curve, i.e., what consumers were willing to pay and the cost, i.e., what consumers had to pay, is known every bit the consumer surplus.

The marginal price of producing a proficient is represented by the supply curve. The price received by the sale of the good would be the marginal benefit to the producer, and so the divergence between the cost and the supply curve is the producer surplus, the additional return to producers to a higher place what they would require to produce that quantity of goods.

Disequilibrium

If the market cost is above the equilibrium, the quantity supplied will be greater than the quantity demanded. The resulting surplus in the marketplace will atomic number 82 producers to cut back on production and lower the price. As the price falls, the quantity demanded increases since consumers are willing to buy more of the product at the lower price. In a competitive market, this process continues till the market reaches equilibrium. While a market may not be in equilibrium, the forces in the market move the market towards equilibrium.

If the market place toll is too depression, consumers are non able to purchase the amount of the product they desire at that cost. As a result of this shortage, consumers will offer a higher toll for the product. Every bit the cost increases, producers are willing to supply more than of the adept, but the quantity demanded by consumers will decrease. Forces in the market place will keep to drive the price up until the quantity supplied equals the quantity demanded.

Shifts in Supply and Demand

The factors of supply and demand determine the equilibrium cost and quantity. Every bit these factors shift, the equilibrium price and quantity will also change.

If the demand decreases, for example a particular fashion of sunglasses becomes less popular, i.e., a change a tastes and preferences, the quantity demanded at each price has decreased. At the electric current price in that location is at present a surplus in the market and pressure for the toll to decrease. The new equilibrium volition be at a lower toll and lower quantity. Note that the supply bend does not shift just a lower quantity is supplied due to a subtract in the price.

If the demand bend shifts right, there is a greater quantity demanded at each price, the newly created shortage at the original price will bulldoze the market place to a higher equilibrium price and quantity. Every bit the need curve shifts the change in the equilibrium price and quantity will be in the same management, i.e., both will increase.

If the supply curve shifts left, say due to an increase in the cost of the resource used to make the production, in that location is a lower quantity supplied at each price. The event will exist an increase in the market place equilibrium price but a subtract in the market equilibrium quantity. The increase in price, causes a motion along the demand bend to a lower equilibrium quantity demanded.

A rightward shift in the supply bend, say from a new production technology, leads to a lower equilibrium cost and a greater quantity. Annotation that every bit the supply curve shifts, the alter in the equilibrium price and quantity volition be in opposite directions.

Complex Cases

When demand and supply are changing at the same time, the analysis becomes more complex. In such cases, we are still able to say whether one of the two variables (equilibrium price or quantity)  will increase or decrease, but nosotros may not be able to say how both volition change. When the shifts in need and supply are driving price or quantity in opposite directions, we are unable to say how one of the ii will change without farther information.

We are able to find the market equilibrium by analyzing a schedule or tabular array, by graphing the data or algebraically.

Even without graphing the curves, we are able to analyze the tabular array and meet that at a price of $30 the quantity demanded equals the quantity supplied. This is clearly the equilibrium point.

If nosotros graph the curves, we find that at price of 30 dollars, the quantity supplied would exist x and the quantity demanded would be ten, that is, where the supply and demand curves intersect.

The information tin likewise be represented by equations.

P = 50 – 2Q_d and P = 10 + 2 Q_south

Solving the equations algebraically will also enable united states of america to find the signal where the quantity supplied equals the quantity demanded and the price where that volition be true. We do this past setting the two equations equal to each other and solving. The steps for doing this are illustrated below.

Our commencement step is to get the Qs together, by adding 2Q to both sides.  On the left mitt side, the negative 2Q plus 2Q cancel each other out, and on the right side 2 Q plus 2Q gives us 4Q. Our next step is to get the Q by itself. Nosotros tin can decrease x from both sides and are left with xl = 4Q.  The terminal step is to carve up both sides past 4, which leaves us with an equilibrium Quantity of ten.

Given an equilibrium quantity of 10, we can plug this value into either the equation nosotros have for supply or need and observe the equilibrium price of $30. Either graphically or algebraically, we end up with the same answer.

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Department 04: Market Intervention

Market Intervention

If a competitive market is gratis of intervention, market forces volition always drive the price and quantity towards the equilibrium. Even so, at that place are times when regime feels a need to intervene in the market and foreclose it from reaching equilibrium. While often done with skillful intentions, this intervention frequently brings about undesirable secondary effects.  Marketplace intervention often comes as either a price floor or a price ceiling.

Price Floor

A toll flooring sets a minimum price for which the good may be sold.  Price floors are designed to do good the producers providing them a toll greater than the original market equilibrium. To be effective, a price floor would need to be above the market equilibrium. At a cost to a higher place the market equilibrium the quantity supplied volition exceed the quantity demanded resulting in a surplus in the market.

For example, the authorities imposed price floors for sure agronomical bolt, such every bit wheat and corn. At a price flooring, greater than the market equilibrium cost, producers increase the quantity supplied of the good. However, consumers at present face a higher cost and reduce the quantity demanded. The result of the toll floor is a surplus in the market.

Since producers are unable to sell all of their product at the imposed price floor, they have an incentive to lower the toll but cannot. To maintain the price flooring, governments are ofttimes forced to step in and purchase the excess product, which adds an additional costs to the consumers who are likewise taxpayers. Thus the consumers suffer from both college prices but also college taxes to dispose of the product.

The decision to intervene in the market is a normative conclusion of policy makers, is the benefit to those receiving a higher wage greater than the added cost to order?  Is the do good of having excess food production greater than the boosted costs that are incurred due to the market place intervention?

Some other case of a toll flooring is a minimum wage. In the labor marketplace, the workers supply the labor and the businesses demand the labor. If a minimum wage is implemented that is above the market equilibrium, some of the individuals who were not willing to work at the original market equilibrium wage are at present willing to work at the higher wage, i.e., there is an increase in the quantity of labor supplied. Businesses must now pay their workers more and consequently reduce the quantity of labor demanded. The outcome is a surplus of labor available at the minimum wage.  Due to the authorities imposed price flooring, cost is no longer able to serve as the rationing device and individuals who are willing and able to work at or below the going  minimum wage may not be able to discover employment.

Price Ceilings

Cost ceilings are intended to benefit the consumer and set a maximum price for which the production may be sold. To exist constructive, the ceiling cost must be below the market equilibrium. Some large metropolitan areas control the price that can be charged for flat rent. The result is that more individuals desire to rent apartments given the lower toll, but apartment owners are not willing to supply as many apartments to the market (i.e., a lower quantity supplied).  In many cases when price ceilings are implemented, blackness markets or illegal markets develop that facilitate trade at a cost above the set government maximum price.

In a competitive market, the economical surplus which is the combined area of the consumer and producer surplus is maximized.

Deadweight Loss

When a price floor is imposed, there is a loss in the economic surplus (Area A and B) known equally deadweight loss. Since consumer surplus is the area below the demand curve and to a higher place the price, with the price floor the area of consumer surplus is reduced from areas B, C, and Eastward to only area E. Producer surplus which is below the price and above the supply or marginal cost bend changes from area A and D to D and C.

A price ceiling as well creates a deadweight loss of area A and B. The consumer surplus area changes from areas East and B to Eastward and C and the producer surplus area is reduced from A, C, and D to simply D.

Excise Tax

Some other government market intervention is the imposition of a tax or subsidy. An excise tax is a tax levied on the production or consumption of a production. To consumers, the taxation increases the price of the good purchased moving them along the need curve to a lower quantity demanded. The vertical distance between the original and new supply curve is the amount of the tax. Due to the tax, the new equilibrium toll (P1) is higher and the equilibrium quantity (Q1) is lower. While the consumer is now paying toll (P1) the producer just receives price (P2) afterwards paying the tax.

Due to the revenue enhancement, the area of consumer surplus is reduced to expanse A and producer surplus is reduced to area B. The taxation revenue is equal to the tax per unit multiplied past the units sold. The areas of consumer and producer surplus that were to the right of Q1 are lost and make up the deadweight loss.

Source: https://courses.byui.edu/econ_150/econ_150_old_site/lesson_03.htm

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