Transcript MA 3.02
3.02 Interpret the theory
of supply and demand
Supply vs. Demand
Supply- the amount Producers are
willing and able to produce and sell
- Seller’s Market
Demand- the Customer’s willingness
and ability to buy the products
- Buyer’s Market
The law of supply
Price of a product increases, quantity
of supply increases
Price of a product decreases, quantity
of supply decreases
The law of demand
Price of a product increases,
consumer demand decreases
Price of a product decreases,
consumer demand increases
When does surplus occur?
Supply exceeds demand
Prices are too high
Consumers buy competitor’s product
When does shortage occur?
Demand exceeds supply (scarcity)
Customers purchase products
regardless of the price
When does equilibrium occur?
Supply = Demand
Producer and Consumer are satisfied
on the same price
Elasticity is…
Elastic demand changes as demand
changes
- Example: Cheeseburger
Inelastic demand rarely changes as
demand changes
- Example: Gasoline
What might affect elasticity?
Availability of substitutes
Brand loyalty
Price relative to income
Luxury vs. necessity (want vs. need)
Urgency of purchase