Transcript Demand and Supply

Demand and Supply
Chapter 21
Changes
in
complements
Changes
in
Substitutes
Changes
in
expectations
Factors
Affecting
Demand
Changes
In
Population
Changes
in income
Government
Policies
Cost
Of
Resources
Technology
Taxes
Factors
Affecting
Supply
Productivity
Subsidies
Expectations
Number
Of
Suppliers
Difficult or
Easy to
Produce
Time
Factors
Affecting
Supply
Elasticity
Expense
Requires
few or many
capital
resources
Necessity or
Luxury
Compliments
Factors
Affecting
Demand
Elasticity
Substitutes
Expense
CSRQ Response
• Would the demand for passenger
airplanes be elastic or inelastic?
Explain why.
• Would the demand for pencils be
elastic or inelastic? Explain why.
Describe the relationship between the
demand schedule and the demand
curve?
A demand curve is a graph which shows the
relationship between product quantities
and product prices.
A demand schedule is a chart which shows
the relationship between product
quantities and product prices.
Price System
Advantages
Prices are
Neutral
They favor neither
the producer nor
the consumer
Prices are
Flexible
War and natural
disasters affect
supply and
demand
Freedom of
Choice
Prices are
Familiar
Variety of products
at a wide range of
prices.
Allows people
to make
decisions
quickly and
efficiently.
VOCABULARY
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Demand
Demand schedule
Demand curve
Law of demand
Market demand
Utility
Marginal utility
Substitute
Complement
Demand elasticity
Supply
Law of supply
Minimum wage
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Supply schedule
Supply curve
Profit
Market supply
Productivity
Technology
Subsidy
Supply elasticity
Surplus
Shortage
Equilibrium price
Price ceiling
Price floor
Demand Curve
• Is a graph that shows the amount of a
product that would be bought at all
possible prices in the market
Demand
• The desire willingness and ability to
buy a good or service.
Demand Schedule
• Is a table that list the various
quantities of a product or service
that someone is willing to buy over
a range of prices
Supply
• Refers to the various quantities of a
good or service that producers are
willing to sell at a given market price
Law of Demand
•Quantity demanded and price
move in opposite directions.
Marginal Utility
•The additional satisfaction
from each additional slice that
you eat
Market Demand
•The total demand of all
consumers for their product
or service.
Supply Curve
•A graph that shows the amount
of product that would be
supplied at all possible prices in
the market.
Utility
•The pleasure, usefulness,
or satisfaction we get from
using a product.
Substitute
•Competing products
which can be used,
one in place of the
other
Complements
•Products that are used
together.
Examples,
Computers and software,
Peanut butter & Jelly.
Supply Schedule
•A numerical chart that
illustrates the law of supply.
Demand Elasticity
•The extent to which a
change in price causes
a change in the
quantity demanded
Profit
•The money a business
receives for its
products or services
over and above its
costs
Law of Supply
•The principle that suppliers will
normally offer more for sale at
higher prices and less at lower
prices
Market Supply
•If you combine the supply
schedules of all the
businesses that provide the
same good or service the
total is called…
Technology
•Refers to the methods
or processes used to
make a goods and
services.
Productivity
•When workers create
more goods and services
and a company's costs go
down.
Subsidy
•Is a government payment
to an individual business or
other group for certain
actions.
Supply Elasticity
•Is a measure of how the quantity
supplied of a good or services
changes in response to changes
in price.
Shortage
•Is the amount by which the
quantity demanded is
higher than the quantity
supplied
Surplus
•Is the amount by which
the quantity supplied is
higher than the
quantity demanded.
Equilibrium Price
•This process goes on until
supply and demand are in
balance. The point where
they achieve balance is
the…
Price Ceiling
•Is a maximum price set by
the government that can
be charged for good and
services.
Minimum Wage
•The lowest legal wage
that can be paid to
most workers. It’s a
price floor
Price Floor
•Is a government
minimum price that can
be charged for goods
and services.
The Law of Demand
Price
Rises
People will buy less
Of the product
Falls
People buy more of
A product at a low
price
Chapter 21
Practice Quiz
1. A demand curve shifts to the right
when
a. the number of consumers in the market area
decreases.
b. people are willing to buy more of the same item
at any given price.
c. the average income of consumers in the market
area declines.
d. consumers are willing to buy fewer items at all
possible prices.
2. The primary motive in business is to
a.
b.
c.
d.
decrease supply.
increase prices.
increase profits.
decrease productivity.
3. What is the main purpose of government
price controls?
a.
b.
c.
d.
to increase taxes
to give producers an edge over consumers
to correct unfairness in supply and demand
to create surpluses
4. Demand for a product tends to increase
when
a.
b.
c.
d.
the price of a complement increases.
the price of a substitute decreases.
consumers expect a surplus.
consumers expect a shortage.
5. Which of the following is a characteristic
of a market economy?
a. People have the freedom to choose from a variety
of products.
b. The government limits the quantity of products
made.
c. The government limits the variety of products
made.
d. Prices are not flexible.
6. Which example illustrates how changes
in complements can influence demand?
a. The demand for margarine increases when the
price of butter rises.
b. The demand for tea decreases when the price of
coffee decreases.
c. The demand for light bulbs increases when the
price of lamps decreases.
d. The demand for pencils increases when the price
of pens rises.
7. Which of the following causes a change in
demand?
a.
b.
c.
d.
government subsidies
taxes on businesses
cost of resources
number of consumers
8. Demand is likely to be inelastic for
goods that
a. are very expensive.
b. have very few or no substitutes.
c. have many substitutes.
d. can be purchased at a later time.
9. The market demand curve slopes downward because
prices go…
a.
down as demand goes up.
b.
down as demand goes down.
c.
up as demand goes up.
d.
up as demand remains stable.
10. Which of the following best explains the upward slope of
the supply curve?
a.High prices motivate consumers to buy more.
b. Low prices motivate consumers to buy less.
c.High prices motivate suppliers to produce more.
d. Low prices motivate suppliers to produce less.
11. When prices are above the
equilibrium price,
a. suppliers produce more than consumers
want to purchase.
b. consumers purchase more of the items
supplied.
c. suppliers have less incentive to supply as
much as is desired.
d. consumers purchase none of the items
supplied.
12. If quantity demanded is greater
than quantity supplied at a particular
price,
a.
b.
c.
d.
scarcity will exist.
shortages will exist.
price will be inelastic.
price will be elastic.
13. According to the law of supply,
higher prices prompt producers to
a.
b.
c.
d.
produce more.
maintain current production.
produce less.
increase demand.
14. The horizontal axis of a demand
curve displays
a.
b.
c.
d.
elasticity.
quantities.
utility.
prices.
15. What does a demand schedule
show?
a.
b.
c.
d.
elasticity and utility
prices and elasticity
quantities and elasticity
quantities and prices
16. A demand curve shifts to the left
when
a. people are willing to buy fewer items at
all possible prices.
b. more consumers enter the market.
c. people are willing to buy more of the
same item at any given price.
d. prices of goods rise.
17. Which factor is most likely to cause
the supply of a product to decrease?
a. a decrease in the price of resources used to
make the product
b. an increase in the number of suppliers
c. a repeal of subsidies for producers
d. a decrease in taxes on businesses
18. The demand for goods and services
in a particular area would probably
increase if
a. a large number of residents moved out of the area.
b. people’s incomes decreased.
c. a new apartment building in the area filled with
families.
d. people expected hard economic times.
19. Which factor has the MOST
significant influence on the quantity
supplied of any product?
a.
b.
c.
d.
price of the product
availability of substitute products
availability of complements
expectations of consumers
20. Which example illustrates how
changes in substitutes can influence
demand?
a. The demand for DVDs declines when the
price of DVD players rises.
b. The demand for computer software declines
when computer prices rise.
c. The demand for tennis balls increases when
the price of tennis rackets decreases.
d. The demand for Ford cars increases when
the price of General Motors cars increases.
21. A surplus typically indicates that
a.
b.
c.
d.
suppliers cannot meet the demand.
the price is too high.
government price controls are needed.
the market is in equilibrium.
22. Which of the following pairs of
products are complements?
a.
b.
c.
d.
light bulbs and lamps
pens and pencils
coffee and tea
butter and margarine
23. In the United States, prices are
established primarily through
a.
b.
c.
d.
the forces of supply and demand.
government regulations.
the decisions of major corporations.
tax incentives.
24. The man’s question demonstrates that
he
a. does not mind high gas prices.
b. does not understand the relationship between
supply and demand.
c. believes that there is a large supply of gasoline.
d. believes that the demand for gasoline is low.
25. The vertical axis of a demand curve
for a product displays
a.
b.
c.
d.
quantities.
utility.
prices.
elasticity.
26. Which sales strategy demonstrates an
understanding of the principle of diminishing
marginal utility?
a.Consumers who purchase an item at full price may purchase
another one at half price.
b. Suppliers offer discounts on a popular new item that is in high
demand.
c.Consumers may use coupons to reduce the cost of weekly
grocery purchases.
d. Suppliers offer rebates for consumers who purchase expensive
new technologies.