Transcript Demand is the

Brief Response
• Do you think the Coke bottle in the previous
exercise had elastic demand or inelastic
demand? Explain.
• Inelastic.
• People felt they could not live without the
item and were willing to compete, even
violently, to get it
• Throwing it away was their only solution.
Investment Project
Place where needed
• Instruction sheet
• Making an Excel spreadsheet.
Section 3
• Elasticity
• 101 a measure of responsiveness
• Tells how a dependent variable (quantity)
responds to a change in an independent
variable (price)
– Will a change in price alter quantity a lot or a
little?
Demand elasticity
• The extent to which a change in price causes a
change in the quantity demanded.
– Tells economists and businesses just how sensitive
consumers are to prices.
Elastic
• 102 When a given change in price causes a
relatively larger change in quantity demanded.
• Garden vegetables
– Very available in the summer, low prices
• People buy more
– Very scarce in the winter, high prices
• People buy less
Inelastic demand
• 102 means that a given change in price causes
relatively little change in quantity demanded.
– Table salt
– Gasoline
• Change in price does not cause an immediate
or noticeable change in quantity demanded
Unit elastic
• 103 demand for a product or service falls
midway between elastic and inelastic
• A given change in prices causes a proportional
change in quantity demanded
– 5% increase/decrease in price
– Causes 4-6% increase/decrease in quantity
demanded.
Chapter 5 Supply
Section 1
• Supply
• 113 the amount of a product that would be
offered for sale at all possible market prices
Law of Supply
• 113 the principle that suppliers will normally
offer
– more for sale at high prices
– Less for sale at low prices
Supply schedule
• 114 listing of the various quantities of a
particular product supplied at all possible
market prices
Supply Curve
• 114 graph presentation of the supply schedule
• Line graph
– Slopes from upper right to lower left
Market supply curve
• 115 graph showing more than one producer’s
reactions to changes in supply
– Produce the same, similar product
Quantity supplied
• 115 the amount that producers bring to
market at a given price
• Change in quantity supplied
• 115 the change in amount brought to market
in response to a change in price
Change in Supply
• 116 A situation where suppliers offer different
amounts of products for sale at all possible
prices in the market.
– More offered at high prices
– Less offered at low prices
Subsidy
• 117 a government payment to an individual
business to
– Encourage it
– Protect it
• Some might call it a “stimulus”
• Helps businesses/economic activities that are
– Just starting
– Having difficulties
Supply elasticity
• 118 measure of the way in which quantity
supplied responds to a change in price
– Small increase in price leads to larger increase of
output
If the quantity supplied changes very little, supply is
inelastic
Hwk Assessments, Class Work,
to Know
Assessments: Checking for Understanding,
CH 4, S3
• 1
• Yachts over Cadillac Escalades
– Why?
– Escalades have more utility
• $20 million dollar home over Crystal
champagne
– Why?
– Not buying Crystal won’t get one closer to
affording the big home.
The Income Gap
• Affording needs vs affording luxuries…..
• Cars
– Maybach (2015: $190,275); other luxury cars
– Ralph Lauren car collection
• Hotel suites
– Slide show
– Burj al Arab (UAE)
•
•
•
•
•
Yachts
Private Jets
Private Islands
Mansions
Luxury items
– Watches
The Income Gap
US population:
300,000,000+/US GDP =
$15,000,000,000,000
<=1% own 40% of US
wealth. How many
Americans is that?
How much wealth per
person in this group? = $
9% own 33% of US
wealth. How many
Americans is that?
How much wealth per
person in this group? = $
90% own 27% of US
wealth. How many
Americans is that?
How much wealth per
person in this group? = $
The Income Gap
US population:
300,000,000+/US GDP =
$15,000,000,000,000
•<=1% own 40% of US wealth.
How many Americans is that?
•<=3,000,000
•How much per capita?
•= $2,000,000/capita
•9% own 33% of US wealth.
How many Americans is that?
•<=27,000,000
•How much per capita?
•= $ 183,333/capita
•90% own 27% of US wealth.
How many Americans is that?
•=270,000,000
•How much per capita?
•= $ 15,000/capita
Income Gap
• Avg. “1-percenter”
• = $2,000,000
= 16 “9-percenters”
= 200 “90-percenters”
• Avg. “9-percenter”
• = $ 183,333
= 12 “90-percenters”
• Avg. “90-percenter”
• = $ 15,000
How many Americans actually “work”
• Current labor force:
• about 62% of Americans work as part of the
current labor force.
CH 4, S3
•
•
•
•
3
Can the purchase be delayed?
Are adequate substitutes available?
Does the purchase use a large portion of
income?
CH 4, S3
• 4.
• Lack of adequate substitutes for insulin
CH 4, S3
• 5
• Because consumers can switch among the
various substitutes.
Assessments: Checking for Understanding
CH 5, S1
•
•
•
•
•
•
•
1
Demand is the
Desire
Ability
Willingness
To buy
Deals with
– How prices affect
consumer spending
• Supply is
• The amount of a
product available for
sale
• Deals with
– How prices affect
quantity supplied by
producers
CH 5, S1
• 3
• Schedule: information on supply in table (list)
form
• Curve: information on supply in graphic form
CH 5, S1
• 4
• Determine amount produced by individual
firms
• Add numbers and plot on a graph
CH 5, S1
•
•
•
•
•
•
•
•
5
Costs of inputs
Productivity
Technology
Number of sellers
Taxes and subsidies
Expectations
Government regulations.
Images, p. 103
• Question
• The concept of elasticity helps businesses
analyze the sensitivity of consumers to price
changes.
• Be sure to acquaint yourself with the graphs
for the exam.
Images, p. 106
• Question
• If the luxury product uses a large portion of
income, demand would generally be elastic
Image, p. 114
• Question
• Law of supply
– Quantity varies directly with price
• Law of demand
– Demand varies with the price
Image, p. 115
• Question
• Because the Law of Supply states that
– more will be offered for sale at high prices than
low prices
Images, p. 119
• Question
• How fast a business can adjust to new prices.
Images, p. 120
• Question
• The number of substitutes and ability to delay
the purchase are important for
– Demand elasticity
– Not supply elasticity
Brief Response
• Explain the difference between elastic
demand and inelastic demand (2).