Transcript The Market SD

The Market
Supply and Demand Together
Reference 5.1
Use supply and demand curves to
understand how price is set.
• Consider a supply and demand curve on
one graph.
• Consider e-bay and how price is set by
bidders
• Consider an imaginary commodities
market.
Review:
• On a graph, the point where supply and
demand intersect is called equilibrium
• Equilibrium in a market exists when the
quantity of a good demanded is equal to
the quantity of a good supplied.
• That point is the equilibrium price
• A change in equilibrium price can be
brought about by changes in supply and/or
demand.
Review
• When there is a greater quantity demanded than
quantity supplied = shortage
• When there is a greater quantity supplied than
quantity demanded = surplus
• MARKETS MOVE TO EQUILIBRIUM
• A change in equilibrium price can be brought
about by changes in supply and/or demand.
What could cause a decrease in supply?
What happened to price?
What could cause a decrease in demand?
What happened to price?
What could cause an increase in supply?
What happened to price?
What could cause an increase in demand?
What happened to price?
Practice Time
• For each of the following scenarios, draw and write what
would happen to supply, demand, equilibrium price and
equilibrium quantity. Explain the reason.
– A company that makes cables for computer networks
invents a way to lower the cost of making their cables.
– A very flashy ad campaign for little-known brand of ice
tea increases its popularity among consumers. The
company is ready to make any amount of iced tea
necessary to satisfy changes in demand.
– With significantly cheaper prices for computers, more
people can buy computers. What might happen to the
market for Internet service?
– Gas prices start to increase dramatically. What happens
to the market for SUVs that get bad gas mileage?
What happens when both Supply
and Demand Shift?
Double Shifts
• S > D = P
• D > S = P
• D > S = P
• S > D = P
• D  = S  = P constant
• D  = S  = P constant
True or False?
• When quantity supplied is greater than
quantity demanded, a surplus exists.
• A shortage occurs when quantity
demanded is greater than quantity
supplied.
• If price is too high, there is a surplus; if
price is too low, there is a shortage.
• The supply of goods on hand is inventory.
Review
1.
If demand increases and supply is constant what
happens to equilibrium price?
2.
If supply decreases and demand is constant, what
happens to equilibrium price?
3.
If supply increases and demand is constant, what
happens to price?
4.
If the shortage is 40 units and the quantity supplied is
533 units, what is the quantity demanded?
5.
If supply decreases by more than demand decreases,
what happens to equilibrium price?
Graph the following:
A. Demand increases in a market
B. Supply decreases in a market
C. Demand decreases in a market
D. Demand decreases by more than supply
increases in a market
Homework:
• Read and note parts of Chapter 5.2:
– P. 129 “Trying Out for a HS Sport”
– P. 130 “GPA, SAT Scores, and College”
– P. 131 “Necessary Conditions…”
• Read and complete Question To Answer
– P. 121 “How a Meeting in Vienna…”
– P. 123 “ The California Gold Rush”
– P. 127 “ How Might Highway Tolls…”
Prepare for Unit 3 Quiz (Ch3-5) Date TBA