Transcript Supply and Demand

APK: Activation of Prior Knowledge
Write at least 3-5 sentences describing a time when…
you were willing to pay any financial price for a good or
service no matter how expensive or you were not willing to
pay any financial price for a good or service because it was
too expensive.
Question[s] of the Day
How and why are the prices of goods and services
important?
How does an equilibrium price occur?
Effects on the price of
goods
Economics
Michael Quinones, NBCT
www.socialstudiesguy.com
Key vocabulary terms:
Describe and explain the following as completely
as possible using Cornell notes
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Supply
Demand
Law of supply and demand
Shortage
Surplus
Equilibrium Price
Inflation
Deflation
Economic Terms
• Supply-The amount or quantity of a good or
service that is available for purchase and use.
• Demand-The desire or want for an item.
Aftermath of Supply and Demand

Surplus: excess product that results
when supply exceeds demand.

Shortage: lack of product that results
when demand exceeds supply.
Equilibrium Price

As we have just seen, demand increases when prices
decline and decreases when price goes up [from the
perspective of a consumer].

The available, willing quantity of a supply from a seller
increases as price increases and decline as price decline.

However, there is a point where supply and demand
meet this is called the price equilibrium or equilibrium
price.
Equilibrium Price
Law of Supply and Demand: Equilibrium Price
Demand increases when prices decline.

Demand decreases when prices increase.
The situation above is known as the Law of demand because it is
something that occurs over and over again.

The available and willing quantity of a supply of goods from a seller
increases as prices increases.

The available and willing quantity of a supply of goods from a seller
decreases as prices decrease.
The situation above is known as the Law of supply because it is
something that occurs over and over again.

Reason?
 Sellers want to earn the highest profit possible.

There is a point when supply and demand meet this is called the price
equilibrium or equilibrium price.
 The equilibrium price also known as the market price is the point when
sellers and buyers are both satisfied with the price of a good.

Inflation
 Has nothing to do with putting air into tires or balloons!
 A decrease in the purchasing power of money.
 Simply put inflation is when your money is less valuable
than it was before.
 This can happen quickly or gradually [over time].
Charting inflation over time
Inflation
 Causes: No single answer
exists to answer why
inflation occurs.
 What are some reasons?
 Monetary theory: Artificial
increase in money supply
[when the government
prints too money].
 “Supply shock”:
Unpredictable changes to
goods/services such as
oil, water or food.
Deflation
 The opposite of
inflation.
 An increase in the
buying power of
money (falling prices).
 Assets (items of value)
decrease in value for
several reasons.
Deflation
 Causes: No single answer
exists to answer why
deflation occurs.
 Governments can
artificially decrease money
supply.
 Reaction to over valuation
of assets or speculation
(corporate greed).
Effects
 Lower prices may
mean lower profits for
companies.
 Lower money supplies
may mean lower
wages.
Content Frame: Copy and Complete
Economically speaking, supply is best described as
_____________________. Demand is best described as
_________________________. A _________ very often impacts the
price goods ________ because of a lack of supply. A _________ very
often impacts the price of goods ________ because of an excess of
supply. The Law of Supply and Demand is best described as
_________________________________
____________________________________________.
An equilibrium price occurs when _________________
_______________________________. __________ because of price
increases lowers consumers’ buying power. _________ may seem
good for consumers due to lower prices but it can lead to higher
unemployment rates and eventually an inability to pay for those
lower cost goods and services.
Sources
 http://www.cardcow.com/images/a-papershortage-outhouse-comic-funny-37470.jpg
 http://www.surplus.cc/Images/surplus.jpg
 http://people.hofstra.edu/geotrans/eng/ch7e
n/meth7en/img/supplydemandprice.gif