Transcript Demand - La Salle High School

Quiz
Returned
Law of Supply
Homework
Supply and Demand
Worksheet
Homework
Read Naked Economics, Chapter 1
Review Powerpoint for next class (online)
Read “Current Reading Assignment” (online)
QUIZ RETURNED
Law of Supply



When price increase, the quantity
supplied increases.
When price decreases, the quantity
supplied decreases.
P Qs , P Q s
A direct relationship.

A Supply Schedule is a table that
relates Price (the driver) to Quantity
supplied (the responder)
P
Qs
This is a
Supply
Schedule

The Law of Supply can be represented
graphically
Price
Supply Curve
Quantity
Why does the Supply curve go “low to high”?
Because when price is high, quantity supplied is high
And when price is low, quantity supplied is low.
Shifts of the Supply Curve
Price
Supply Curve
Decrease
Increase
Quantity
I = R, D = L still applies
ELASTICITY OF SUPPLY
 How sensitive are suppliers to a
change in price
 P Qs
= Elastic Supply
 P Qs
= Inelastic Supply
Remember…Law of Supply still applies
Length of time to produce the good or
service is the main determinant of the
elasticity of supply
The longer it takes to produce the good or
service, the more inelastic.
Helpful Hint…Inelastic is the long word and that takes a long time
to produce
Supply curves, elastic and inelastic
Price
Inelastic
Long time to produce
Ex. Airplanes, gasoline, wine
Elastic
Short time to produce
Ex. Hamburgers, bottled water, music files
Quantity
Questions on supply
1. What is the law of supply?
(a) the lower the price, the larger the quantity supplied
(b) the higher the price, the larger the quantity supplied
(c) the higher the price, the smaller the quantity supplied
(d) the lower the price, the more manufacturers will produce the good
2. What happens when the price of a good down?
(a) existing producers will expand and some new producers will enter
the market
(b) some producers will produce less and others will drop out of the
market
(c) existing firms will continue their usual output but will earn less
(d) new firms will enter the market as older ones drop out
Government Influences on Supply
By raising or lowering the cost of producing goods, the
government can encourage or discourage an entrepreneur or
industry.
Subsidies
A subsidy is a government payment that supports a business or
market. Subsidies cause the supply of a good to increase.
Taxes
The government can reduce the supply of some goods by placing
an excise tax on them. An excise tax is a tax on the production or
sale of a good.
Regulation
Regulation occurs when the government steps into a market to
affect the price, quantity, or quality of a good. Regulation usually
raises costs.
Shifts of the Supply Curve
Price
Taxes &
Regulation
Supply Curve
Subsidies
Quantity
What is the effect on price?
Government Influences on Supply
EXAMPLES?
Subsidies
Taxes
Regulation
Government Influences on Supply
EXAMPLES?
Subsidies…Electric Cars, College education,
“green industries”
Taxes…Cigarettes, alcohol, green house gases
Regulation….Cars, Housing
OTHERS?
THREE MINUTE BREAK
http://www.online-stopwatch.com/bombcountdown/
Supply and Demand
Putting Supply and Demand together
Take out a piece of paper
Supply and Demand
Putting Supply and Demand together
Price
Quantity
Supply and Demand
Draw a Demand Curve
Price
Quantity
Supply and Demand
Draw a Demand Curve
Price
Demand
Quantity
Supply and Demand
Add a Supply Curve
Price
Demand
Quantity
Supply and Demand
Add a Supply Curve
Supply
Price
Demand
Quantity
Supply and Demand
Reading the graph
Supply
Price
5 Parts to
a fully labeled
Supply and
Demand graph
1. Price
2. Quantity
3. Supply
4. Demand
5. Equilibrium
Equilibrium
Demand
Quantity
Supply and Demand
Equilibrium determines market price and market quantity.
Supply
Price
5 Parts to
a fully labeled
Supply and
Demand graph
1. Price
2. Quantity
3. Supply
4. Demand
5. Equilibrium
Equilibrium
Demand
Quantity
Supply and Demand
Now show the effect of an increase in demand
Supply
Price
Equilibrium
Demand
Quantity
Supply and Demand
Increase shifts the curve to the right (remember…I = R, D = L) and changes
the equilibrium (i.e. price and quantity)
Supply
Price
New Equilibrium
Demand
Quantity
Supply and Demand
Increase shifts the curve to the right (I = R, D = L) and changes the equilibrium
(i.e. price and quantity)
Supply
Price
New Equilibrium
Demand
Quantity
Supply and Demand
What was the effect on price and quantity?
Supply
Price
New Equilibrium
Demand
Quantity
Supply and Demand
What was the effect on price and quantity?
Supply
Price
Equilibrium
Demand
Quantity
Student Video
http://www.youtube.com/watch?v=xGRmF8jdAtw
worksheet
Taxes and subsidies
What’s the public benefit that justifies the
Government’s action (the tax)?
What are the unintended consequences
of the Government’s action?
What are other alternatives for the Government
to achieve the goal?
Let’s see if we got it…
http://www.wnyc.org/story/101889morning-coffee-costs-more/
draw a fully labelled (five parts) supply
and demand curve explaining what’s
going on
Supply and Demand Curve
Shortages and Surpluses
Supply
Price
Equilibrium
SHORTAGE =
Price BELOW
the equilibrium
price
Supply is less than
Demand.
SHORTAGE
Demand
Quantity
Shortages and Surpluses
Supply
Price
Equilibrium
What happens
when there
is a shortage
of something?
SHORTAGE
Demand
Quantity
Shortages and Surpluses
Demand is less than supply
Supply
Price
SURPLUS
Equilibrium
SURPLUS =
Price ABOVE
the equilibrium
Price.
Demand
Quantity
Shortages and Surpluses
Supply
Price
SURPLUS
Equilibrium
And what happens
when there is
a surplus
of something?
Demand
Quantity
Homework
Review Powerpoint for next class (online)
Read “Current Reading Assignment” (online)
Read Naked Economics, Chapter 1…“Who Feeds
Paris?”
Helpful Hint…as you read Chapter One of Naked Economics,
ask yourself “How does it relate to Supply and Demand?”
Homework
Read Naked Economics, Chapter One
Helpful Hint…as you read Chapter One,
how does it relate to Supply and Demand?