Transcript ppt 2 _ Shifts in Supply and Demand

Today’s Warm Up
Pick
up at the front of
the room and wait for
the video to start!!!
Shifts in Supply and
Demand
Today’s LEQ: How do
markets operate?
Shifts in Supply and Demand



Quantity
supplied/demanded refers
to amount
producers/consumers wish
to sell/buy; change in QS
or QD represented by
movement along the
corresponding curve
Supply/demand refers to
the position of the
supply/demand curve
Change is S or D
represented by the
movement of the entire
curve
Factors that cause demand to
change or shift
Tastes and fads
 Income

 normal


goods vs. inferior goods
Number of buyers
Expectations
 Future
 Future

prices
income
Price of related goods:
 Substitutes (i.e. Coke and Pepsi)
 Compliments (i.e. peanut butter and jelly)
Can you come up with a cool mnemonic device???
Activity 1: Think, Pair, Coach

Person A – complete side A
 Explain
your answer to Person B
 Person B will say “Yes, that’s correct! Great job!”…
Or, they will explain what you did wrong

Person B – Complete side B
 Explain
your answer to Person A
 Person A will say “Yes, that’s correct! Great job!”…
Or, they will explain what you did wrong

Alternate until all questions have been
completed.
Factors that cause a change in
supply:
 Input
prices: land, labor or capital
(factors of production)
 Technology
 Expectations
 Future
prices
 Prices of other goods you could produce
 Number
of sellers
 Changes in tax policy or subsidies
Can you come up with a cool mnemonic device???
Activity 2: Think, Pair, Coach

Person A – complete side A
 Explain
your answer to Person B
 Person B will say “Yes, that’s correct! Great job!”…
Or, they will explain what you did wrong

Person B – Complete side B
 Explain
your answer to Person A
 Person A will say “Yes, that’s correct! Great job!”…
Or, they will explain what you did wrong

Alternate until all questions have been
completed.
IRDL the Turtle 
“IRDL” will help
you!
 INCREASE =
RIGHT
 DECREASE =
LEFT
Today’s Warm Up


Pick up the article from the front desk. Read
and complete the steps below. BE READY TO
SHARE!
3 steps for analyzing changes in equilibrium:
1.
2.
3.
Decide whether the event shifts the supply or
demand curve.
Decide in which direction the curve shifts.
Use the supply and demand diagram to see how the
shift changes equilibrium price and quantity.
Justin Bieber…

Failed his economic assignment (probably
because he was in jail). Help him understand
what he did wrong.
Market Equilibrium
•
•
•
•
•
LO
Equilibrium occurs where the demand curve and
supply curve intersect
Equilibrium price and equilibrium quantity
Surplus and shortage
Rationing function of prices = ability of
competitive forces of S & D to establish price
where buying and selling decisions are
coordinated
Efficient allocation
Efficient Allocation
•
•
LO
Productive efficiency
• Producing goods in the least costly way
• Using the best technology
• Using the right mix of resources
Allocative efficiency
• Producing the right mix of goods
• The combination of goods most highly
valued by society
Market Equilibrium
6
5
Qd
$5
2000
4
4000
3
7000
2
11,000
1
16,000
Price (per bushel)
P
6,000 bushel
surplus
S
P
4
3
2
7,000 bushel
shortage
1
0
2
4
67
8
10
D
12
14
16
18
Bushels of corn (thousands per week)
LO
Qs
$5
12,000
4
10,000
3
7000
2
4000
1
1000
Rationing Function of Prices
•
LO
The ability of the competitive forces of
demand and supply to establish a price at
which selling and buying decisions are
consistent
Changes in Demand and
Equilibrium
D increase:
P, Q
D decrease:
P, Q
P
P
S
S
D2
D3
D1
0
0
Increase in demand
LO
D4
Decrease in demand
Changes in Supply and
Equilibrium
S increase:
P, Q
S decrease:
P, Q
P
P
S1
S4
S2
D
D
0
0
Increase in supply
LO
S3
Decrease in supply
Complex Cases
Effects of Changes in Both Supply and Demand
Change in Supply Change in Demand
Effect on
Equilibrium Price
Effect on
Equilibrium
Quantity
1. Increase
Decrease
Decrease
Indeterminate
2. Decrease
Increase
Increase
Indeterminate
3. Increase
Increase
Indeterminate
Increase
4. Decrease
Decrease
Indeterminate
Decrease
LO