ACCA BT Syllabus A. The Business Organisation And Its External Environment - Demand & Supply of Goods & Services - Notes ^{1 / 4}

Microeconomics

Microeconomics looks into the individual people and firms within the economy. 

The competition also has a key influence on the micro environment.

The 5 M’s refer to inputs that an organisation requires in order to function.  They are:

1. Materials

2. Money

3. Men (human resources)

4. Machines

5. Management

Utility

Utility describes the benefit of consuming goods.

• Total utility is the total benefit people get from spending their income on consuming goods.

• Marginal utility is the satisfaction gained from consuming one additional unit of a good

Demand for goods and services

Demand is affected by:

1. Price (of the product)

2. Price (of other products)

3. The consumer’s Income

4. Sociological factors

5. Tastes

All of the above create what we call a shift in the demand curve

Generally the higher the price the less is demanded. Hence a downward sloping curve (see diagram)

Supply for goods and services

Supply is affected by:

1. Price (of the product)

2. Prices (of factors of production)

3. The Goals of producing firms

4. Technology

All of the above create a shift in the supply curve.

Supply is basically what producing firms are willing to supply. They will normally supply more for a higher price (received) Hence the curve is normally upward sloping (see diagram)

Equilibrium

• Where demand and supply intersect the economy is said to be at equilibrium.  

  This is the most efficient point/price because supply is exactly matched with demand. So everybody is happy