Transcript Supply and Demand Graphs

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Price
Demand is the amount of a good or service that
buyers are willing and able to buy at all prices
during some time period. The demand curve
depicts the demand for a good or service.
a
The equation for this graph is
P=a–bQ
P
Q
a is the intercept on the
Price or (y) axis and b is the
gradient of the graph
Quantity
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Price
The supply curve depicts the supply of a good or
service. It shows the quantity of a good or service
that producers are willing and able to sell at all
possible prices during some time period.
The equation for this graph is
P=a+bQ
P
a
Q
a is the intercept on the
Price or (y) axis and b is the
gradient of the graph
Quantity
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
Factors other than the price of a good or service
that change (shift) the demand schedule, causing
consumers to buy more or less at every price.
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•
Change in income: With a higher income (lower
income) consumers are willing and able to buy more
(less) of a product at every price.
•
Change in tastes or preferences: If a study reveals
that cookies are nutritious, the demand for cookies
probably would increase. If a study found cookies are
harmful, the demand for cookies would probably
decrease.
•
The number of consumers in the market is a demand.
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
Change in the price of complementary goods. If the price
of hot chocolate increases, people will drink less hot
chocolate and may buy fewer cookies to eat with hot
chocolate. As a result, the demand for cookies decreases.
If the price of hot chocolate decreases, people will drink
more hot chocolate and will buy more cookies to eat with
hot chocolate, so the demand for cookies will increase.

Change in the price of substitute goods. If the price of
eggs goes up, consumers may substitute cereal for
breakfast. As a result the demand for cereal will increase.
If the price of eggs decreases, please may eat less cereal.
As a result the demand for cereal decreases.
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
Factors other than the price of a good or service
that change (shift) the supply schedule, causing
producers to supply more or less at every price.
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
Greater the number of sellers, greater will be
the quantity of a product or service supplied in a
market and vice versa. Thus increase in number
of sellers will increase supply and shift the supply
curve rightwards whereas decrease in number of
sellers will decrease the supply and shift the
supply curve leftwards. For example, when more
firms enter an industry, the number of sellers
increases thus increasing the supply.
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A newly released study shows
that battery-operated toys
harm a child's development.
How will this affect the market
for battery-operated toys?
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Due to a price hike the wages
of laborers on wheat farms
increased by 10% over the last
year.
How could this affect the
wheat market?
10
The price of iPhones decreases.
What will be the effect on the
market for sim cards used in
iPhones?
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The world price of low grade
coal, used to generate
electricity, increased drastically
in the last 3 months.
How could this possibly affect
the market for household gas?
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A more efficient way to trap
crabs has been invented.
What will be the affect on the
market for tinned crab meat?
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