Transcript Supply and Demand 101 - Big Walnut Middle School

Supply and Demand
101
A basic supply and
demand curve
• The vertical axis is PRICE
• The horizontal axis is QUANTITY
• The Demand curve slopes down and
to the right
• The supply curve slopes up and to
the right
A basic supply and
demand curve
Law of Demand
• The price goes up
demand goes
down
• The price goes
down demand
goes up
• Price and demand
have an inverse
relationship
Change in quantity
demanded
• All this means, is there is a
price change
• All the movement is along the
existing demand curve
Change in quantity
demanded
Change in demand
• All this means, is a variable
has been introduced
• The old demand curve no
longer applies and we have
to draw a new one
Change in demand
Demand Increase
Demand Decrease
Examples of variables
in demand
Population increase
Population increase
Kroger
• More people in
Sunbury means
more grocery
sales
• Kroger comes
here
Income
Income
• As more people
lose jobs, their
ability to buy
things declines
Tastes and
preferences
Tastes and
preferences
Short Shorts
• The demand
for short
basketball
shorts could
not be lower
Substitution effect
Substitution Effect
Burger King
• 2 similar products
• The price of one
changes, it will effect
the demand for the
other
• The graph to the right
represents the demand
for Burger King after
McDonalds raised
prices
Complimentary
good
Complimentary
good
Jelly
• 2 products that go
together like PBJ
• The graph
represents the
demand for jelly if
the price of peanut
butter goes up
Law of supply
• The price goes up
supply goes up
• The price goes down
supply goes down
• Supply and price have
a direct relationship
• They move in the
same direction
Law of supply
we all have our price
Change in quantity
supplied
• All this means, is there is a
price change
• All the movement is along
the existing supply curve
Change in quantity
supplied
Change in Supply
• All this means, is a variable has
been introduced
• The old supply curve no longer
applies and we have to draw a
new one
Change in supply
Increase in Supply
Decrease in Supply
Examples of variables
in supply
Price of inputs
Price of inputs
Supply of anything
that must transport a
product
• Inputs are raw
materials used in
production
• When they increase,
firms cannot supply as
many products at any
given price
• The graph shows the
negative effects of
higher gas prices
Technology
improvement
Technology
improvement
Supply of Books
• Improvements in
technology improves
productivity
• The kindle makes it
cheaper to produce
books
• The graph shows the
positive effect
Taxes government
regulations
Taxes government
regulations
Auto Industry
• Government
regulations may
protect the consumer,
but they make it more
expensive to produce
things
• The graph shows the
effect of forcing the
auto industry to
include air bags