Transcript LESSON 6.2 Shifts of Demand and Supply Curves

Standard Address
 12.1 Students understand common terms
& concepts and economics reasoning.
6.2 - Objectives
 Explain how a shift of the demand curve affects
equilibrium price and quantity.
 Explain how a shift of the supply curve affects
equilibrium price and quantity.
 Explain what happens to equilibrium price and
quantity if both curves shift.
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LESSON 6.2
Key Terms
Shifts of Demand
and Supply Curves
 increase in demand
 decrease in demand
 increase in supply
 decrease in supply
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Shifts of the Demand Curve
A shift of the demand curve means that
quantity demanded changes at each
price.
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What Could Shift
the Demand Curve?
An increase in the money income of
consumers
An increase in the price of a substitute
A change in expectations
A growth in the population of consumers
A change in consumer tastes
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What Could Shift
the Demand Curve?
An increase in the
money income of
consumers
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What Could Shift
the Demand Curve?
An increase
in the price of
a substitute
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What Could Shift
the Demand Curve?
A change in
expectations
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What Could Shift
the Demand Curve?
A growth in
the population
of consumers
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What Could Shift
the Demand Curve?
A change in
consumer tastes
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An Increase in Demand
An increase in demand means that
consumers are now more willing and able
to buy the product at every price.
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An
Increase
Demand
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A Decrease in Demand
A decrease in demand means that
consumers are less willing and able to
buy the product at every price.
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A
Decrease
Demand
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Summary of Demand Shifts
If the demand curve shifts rightward,
price and quantity increase.
If the demand curve shifts leftward, price
and quantity decrease.
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Checkpoint: pg. 171
How does a shift of the demand curve
affect equilibrium price and quantity?
 A rightward shift of the demand curve
increases both price and quantity,
 A downward shift of the demand curve
decreases both price and quantity.
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Shifts of the Supply Curve
A shift of the supply curve means that
quantity supplied changes at each price.
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What Could Shift the Supply
Curve?
1. A reduction in the price of a resource used to
make pizza, such as mozzarella cheese.
2. A decline in the price of another good these
resources could make; such as Italian bread.
3. A technological breakthrough in pizza ovens.
4. A change in expectations that encourage
pizza makers to expand production
5. An increase in the number of pizzerias.
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An Increase in Supply
An increase in supply means that
producers are more willing and able to
supply pizza at every price.
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A Increase in Supply
As long as the demand curve slopes downward,
a rightward shift of the supply curve reduces
the price but increases the quantity
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Shift of the Supply Curve
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A Decrease in Supply
A decrease in supply means that
producers are less willing and able to
supply the product at every price.
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A Decrease in Supply
As long as the demand curve slopes downward,
a leftward shift of the supply curve increases
the price but reduces the quantity.
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Summary of Supply Shifts
If the supply curve shifts rightward, price
decreases but quantity increases.
If supply shifts to the left, price increases
but quantity decreases.
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Summary of Supply Shifts
Given a downward –sloping demand curve,
a rightward shift of the supply curve
decreases price but increases quantity,
and a leftward shift of the supply curve
increases price but decreases quantity.
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Checkpoint: pg. 173
How does a shift of the supply curve
affect equilibrium price and quantity?
 A rightward shift of the supply curve
decreases price but increases
quantity, and a leftward shift of the
supply curve increases price but
decreases quantity.
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Both Curves Shift
Curves shift in the same direction
Equilibrium quantity will increase.
What happens to price depends on which curve
shifts more.
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Both Curves Shift
Curves shift in opposite directions
Equilibrium price will increase if demand increases
and supply decreases.
Equilibrium price will decrease if demand decreases
and supply increases.
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Change in Demand
Change in Supply
Increases
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Decreases
Equilibrium price change
is indeterminate.
Equilibrium price falls.
Equilibrium quantity
increases.
Equilibrium quantity
change is indeterminate.
Equilibrium price rises.
Equilibrium price change
is indeterminate.
Equilibrium quantity
change is indeterminate.
Equilibrium quantity
decreases.
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Checkpoint: pg. 175
What happened to equilibrium price and
quantity if both curves shift in the same
direction?
 If both curves shift, the equilibrium quantity will increase.
 Whether the equilibrium price increases or decreases depends on
which curve shifts more.
 If the demand curves move in opposite directions, you can say
what will happen to the price.
 Equilibrium price will increase if demand increases and supply
increases.
 Equilibrium price will decrease if demand decreases and supply
increases.
 You can’t say for sure what will happen to quantity when the curves
move in opposite directions.
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