Transcript Demand and Supply

-How
do markets allocate
scarce resources?
- What determines demand?
-What determines supply?
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I have only ONE bag of sweets
I’ll give them to the highest bidder
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How did I decide who to give the sweets to?
If I had 10 bags of sweets how much would you have offered me?
If sweets were banned in the US how much would you have
offered me?
If you could get free sweets in the cafeteria how much would you
have offered me?
SCENARIO 1
•Parents are being told
by doctors that 3 bags
of candy is the
recommended daily
allowance to keep your
children happy
Q. What happens to the amount of candy consumers
are willing to demand, and the price of candy?
Scenario 2
• Chocolate has become
very cheap in comparison
to candy
Scenario 3
• There is a major recession
and low income families
experience a rise in income
taxes
Q. What happens to the amount consumers are
willing to demand, and the price of candy?
Plot:
Price
(in cents)
Quantity
Demanded
5
75
10
70
15
65
20
60
25
55
30
50
35
45
40
40
45
35
50
30
•Price on the y axis
•Quantity on the x axis
•A demand curve
Describe:
•What the graph is showing you.
•What happens to Demand if price increases from 10cents
to 30cents?
•What happens to Demand if price falls from 40cents to
20cents?
Show on the graph:
•What would happen to Demand if people experienced a
50% increase in wages?
•What would happen to Demand for candy if chocolate
became incredibly expensive in comparison?
•What happens to Demand if doctors recommended
candy as a cure for the common cold?
•What happens to Demand if manufacturers invest in a
marketing campaign advertising candy?
Scenario 4
 Sugar cane farmers have
had several bad years
and crops are very low
Scenario 5
 Candy factory workers
have won a union strike
to increase their wages
by 50%
Scenario 6
 The government offers
tax cuts to confectionary
businesses
Q. What happens to the amount sweet manufacturers are
willing to supply, and the price of candy?
PRICE
SUPPLY
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Plot:
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Price on the y axis
Quantity on the x axis
A Supply curve
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Describe:
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What the graph is showing you.
What happens to Supply if price increases from
10cents to 30cents?
What happens to Supply if price falls from
40cents to 20cents
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(In Cents)
5
30
10
35
15
40
20
45
25
50
30
55
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Show on the graph:
35
60

40
65

45
70
50
75
What would happen to Supply if the price of
sugar increased?
What would happen to Supply of candy if
demand for chocolate grew rapidly in
comparison?
What happens to Supply if sweet manufacturers
are offered grants?
What happens to Supply if manufacturers are
taxed an ‘unhealthy tax’?
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Demand shows how willing or able a ________ is to
buy a particular good at different prices.
Supply shows how ________ or able a firm is to
produce / manufacture a commodity at different
__________.
If prices are _________ consumers are ______ likely
to demand a commodity.
If prices are _________ producers are ______ likely
to supply a commodity.
 How does Nina decide how many pairs of new
shoes to buy each month?
 How do you decide how many songs to
download every week?
 How do your parents decide how many
vacations abroad to go on every year?
 How do you decide how many pairs of trousers
to buy every month?
Price is a flag!
HIGHER PRICES
High prices act as a SIGNAL to consumers and producers.
Q. What signal does an increase in price send to both consumers and
producers?
Price is a flag!
LOWER PRICES
High prices act as a SIGNAL to consumers and producers.
Q. What signal does a fall in price send to both consumers and producers?
Think about the following scenario and consider the
questions:
It’s summer time in New York 2012 and there is a heat wave.
Huge numbers of people, tourists and visitors want a
refreshing drink. Newsagents, supermarkets and vendors
cannot keep up with demand and their fridges and
shelves are empty within an hour of opening the shop.
- How could the retailers capitalize on this situation?
- What might unemployed locals do to capitalize on this?
- What happens to the demand curve?
- What impact has the ‘excess’ demand had on price?
- How have the resources (drinks) been allocated?
- Is this a ‘fair’ distribution of resources?
Think about the following scenario and consider the questions:
Across the world dairy farmers are over producing milk, farming
techniques have become more efficient and simultaneously an
announcement is made on the news that drinking milk may be
the cause of a new super-bug. Retailers have mountains of milk
cartons piled in stock rooms, farmers have milk churns full and
lorry loads waiting for orders.
- What do the farmers do in order to get rid of excess milk?
- How much do retailers offer farmers in return for milk?
- What happens to the price of milk for consumers?
- Show the impact of this on a diagram
What happens to the consumers who were willing to demand at
a price higher than equilibrium?
What happens to the businesses that were willing to supply at a
price lower than equilibrium?
 Using
a supply and demand diagram,
comment on the extent to which changes in
the global demand and supply of food may
have affected the market equilibrium.
 State and explain two reasons for increased
global demand for food products.
 State and explain two reasons for a fall in
the global supply of food products.