Transcript supply and demandx

What
is a market?
In a market who is the
consumer?
How does the price of a
good affect the consumer?
 An
arrangement that allows
buyers and sellers to
exchange things
 Markets exist because no one
is self sufficient and no one
produces all we require to
satisfy all our needs and
wants.
Description
› The quantities of a particular
good or service consumers
are willing and able to buy
at different possible prices at
a particular time
As price goes
up, quantity
demanded
goes down
Price
D1
Quantity
 How
does demand and
“want” or “desire” differ?
 You may want or desire a new
car or a closet full of clothes,
but you demand these things
only when you are willing and
able to buy them.
The
quantities of a
particular good or service
consumers are willing and
able to buy at set prices at
a particular time
Price
D2
Quantity

How much people
are going to buy at
the various prices.
Price
$.50

Ex. The price of pizza
$1.00
$1.50
$2.00
$2.50
Quantity
 As
price goes up quantity goes
down
 As price goes down quantity
goes up
 People buy less of something
at higher prices than they do
at lower prices.
 demand
that is very sensitive to a
change in price
 goods that one might stop buying or cut
back on as price increased (SUVs,
Luxury items)**on a graph this demand
curve will be FLAT
demand that is not very sensitive to a change
in price
 goods that you would buy at any price; there
are few if any substitutes for these goods.
 (milk, gas, prescription drugs) **on a graph
this demand curve would be very steep.


Decrease in Price

Increase in Price
Price
Price
D1
Quantity
D2
D2
D1
Quantity
The less you buy the more you will move to the left!
The
Demand Curve slopes
downward to the right
because the consumer is
willing and able to buy
more gasoline at lower
prices than at higher prices.
Harris
Teeter is advertising a
sale on hot dog buns.
What is the impact on the
demand for hot dogs?
Playstation
3, the newest
video game console, hits
stores. What is the impact
on the demand for Xbox
360?
The
weatherman forecasts
rain for the weekend in
Charlotte. What is the
impact on the demand for
umbrellas?
The
N.C. General Assembly
increases minimum wage
to $7/hour. What is the
impact on the demand for
clothing?
A
snowy blizzard blows
through Charlotte. What is
the impact on the demand
for snow boots?
The
price of MP3 players
decreases dramatically
due to new technology.
What is the impact on the
demand for portable CD
players?
Summertime
is
approaching. What is the
impact on the demand for
shorts?
The
price of hamburgers
increases at Food Lion.
What is the impact on the
demand for French fries?
People’s
Income
Weather
Complementary
Substitute
Goods
Goods
Complementary
Good:
Two goods that are usually
consumed together (Hot
Dogs & buns)
Substitute
Good: An
acceptable replacement
for a good (Playstation &
Xbox)
P
Effect on Demand
 Demand
Increases

› (shift right)
D1
Q
D2
Effect on Demand
 Demand
Decreases

P
› (shift left)
D2
Q
D1
P
Effect on Demand
 Demand
Increases

› (shift right)
D1
Q
Peanut Butter
D2
P
Effect on Demand
 Demand
Decreases

› (shift left)
D2
Q
Pepsi
D1
Can YOU tell the
difference????
How
much the quantity
demanded will change if
the price rises or falls.
Now
you are the producer
Think about the business
you are creating
Things are now going to
reverse

Description
› The quantity of
goods a producer is
willing and able to
sell at various prices
at a particular time.
P
S1
Q
› The quantity of
P
S1
Q
goods a producer is
willing and able to
sell at a set price at
a particular time.

A list of quantities
supplied by a
provider at certain
prices
Price
$.50
Quantity
1
$1.00
2
$1.50
3
$2.00
4
$2.50
5
 As
price goes up, quantity
goes up
 As price goes down, quantity
goes down
 More
items will be offered for
sale at a higher price than at
a lower price
Price
S1
S2
Quantity
Price
S2
S1
Quantity
The
Supply Curve slopes
upward and to the right
because the producer is
willing and able to sell more
products at higher prices
than at lower prices.
Cost
of Inputs
Number
Weather
of Suppliers
P
Effect on Supply
 Supply Increases
S1
S2
› (shift right)
› Spending less to run
the business

Examples
› Land
› Labor
› Capital
Q
Effect on Supply
 Supply Increases
P
S1
S2
› (shift right)

Example: Basketballs
› Dicks Sporting Goods
› Sports Authority
› Footlocker
Q
P
Effect on Supply
 Supply Decreases
S2
S1
› (shift left)

Example
› A hurricane during
the orange growing
season
Q
1) Together lets decide if the
following scenarios are a
change in…
› Input costs
› Number of suppliers
› Weather
2) Then decide if it will
› Increase supply
› Decrease Supply
Dick’s Sporting Goods goes
out of business. What is the
impact on basketballs in
Charlotte?
-number of suppliers changes
-Supply Decreases
A hurricane destroys the
orange groves in Florida.
What is the impact on the
supply of Orange Juice?
-weather changes
-Supply Decreases
The price of gas decreases.
What is the impact of
trucking companies?
-cost of inputs change
-Supply Increase
Nike moves their factory from
the U.S. to China where
workers are paid less. What is
the impact on the supply of
Nike’s shoes?
-change in input costs
-Supply Increases
Equilibrium:
the point at
which quantity demanded
and quantity supplied are
equal
the
price and quantity are
balanced
the market for a
good/service is stable
Disequilibrium:
any price or
quantity not at equilibrium


Excess Demand:
when quantity
demanded is more
than quantity
supplied
aka SHORTAGE!!!!
shortage


Excess Supply: when
quantity supplied is
more than quantity
demanded
aka SURPLUS!!!!
surplus

A shift in the
demand curve or
the supply curve will
result in a new
equilibrium price.
 Price
Ceiling: a maximum
price that can be legally
charged for a good or
service
› (example: rent control)

Price Floor: a minimum price
for a good or service
› (example: minimum wage)
Inflation: a general increase
in prices (over the years,
prices rise and fall, but in the
American economy, they
have mostly risen)
 Deflation: A substantial drop
in the prices
