Transcript Supply and Demand PPT notes

2016-2017
Supply and Demand
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Supply Curve
The supply curve has a positive slope, consistent with
the law of supply.
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The Law of Supply
Let's say that you own a farm and you sell apples along with other fruits. One
day, you sell your apples at the farmer's market for fifty cents per apple and sell
out. The next day you sell your apples for a dollar a piece and you run out of
apples again. Now you are making twice as much revenue from apples. Since
you know you can sell apples for a dollar a piece, will you bring more or less
apples to the market? Will you plant more or less apples next year?
When the price of a good rises, the supply for that good increases and when
the price of a good falls, the supply for that good decreases.
• The law of supply holds that other things equal, as the price of a
good rises, its quantity supplied rises. As the price falls, the
quantity supplied falls
• Why do producers produce more output when prices rise?
– They seek higher profits
– They can cover higher marginal costs of production
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Demand Curve
The demand curve has a negative slope, consistent with
the law of demand.
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The Law of Demand
Let's say that you buy 7 apples a week at a price of fifty cents
per apple. If the price of those apples goes up to one dollar
per apple, will you buy more or less apples?
When the price of a good rises, the demand for that good
decreases and when the price falls, the demand for that
good increases. This is the law of demand
• The law of demand holds that other things
equal, as the price of a good or service rises, its
quantity demanded falls.
– The reverse is also true: as the price of a good or
service falls, its quantity demanded increases.
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Equilibrium
• In economics, an equilibrium is a situation in
which:
– there is no inherent tendency to change,
– quantity demanded equals quantity supplied
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Equilibrium
Equilibrium occurs at a price of $3 and a quantity of 30
units.
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Equilibrium After a Demand Shift
The shift in the demand curve moves the market
equilibrium from point A to point B, resulting in a
higher price and higher quantity.
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Equilibrium After a Supply Shift
The shift in the supply curve moves the market equilibrium from
point A to point B, resulting in a higher price and lower quantity.
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Literacy Feb. 2 (RL 6.4)
. The streets were strange and still, / Through the doors of
1
the open churches. The organs were moaning shrill.
a. simile
b. metaphor
c. hyperbole d. personification
2. Chicago is a city that is fierce as a dog with tongue lapping
for action.
a. Enjambment
b. metaphor
c. simile
d. onomatopoeia
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Warmup
Thursday, Feb. 2, 2017
7. Entrepreneurs do all of the following EXCEPT
A) take risks from business decisions.
B) own all the other resources.
C) come up with new ideas about what, how, when and where to produce.
D) organize labor, land, and capital.
8. Overtime worked by a JCPenney associate is considered ________ and
earns ________.
A. entrepreneurship; profit
B. labor; profit
C human capital; interest
D labor; wages
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Supply and Demand
What if market price is above or below
equilibrium? What would result from that?
Draw a straight, horizontal line across your graph
across your concert tickets graph at $90 and
another one at $60.
With your shoulder partner:
--- If the price goes to $90 what will happen.
--- If the price goes to $60 what will happen
https://www.youtube.com/watch?v=APUrVaG0q
W4
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Supply and Demand
What if market price is above or below
equilibrium? What would result from that?
On your bread graph, draw a straight, horizontal
line across your graph at $1.50 and $.50.
With your shoulder partner:
---what will happen if the price is $1.50?
--- what will happen if the price is $0.50?
https://www.youtube.com/watch?v=APUrVaG0q
W4
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Shortages and Surpluses
• A shortage occurs when quantity demanded
exceeds quantity supplied.
– A shortage implies the market price is too low.
• A surplus occurs when quantity supplied
exceeds quantity demanded.
– A surplus implies the market price is too high.
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Supply and Demand shifts
https://www.youtube.com/watch?v=V0tIOqU7mc – Video
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5 Shifts in Supply or Demand
Mr. Clifford picture
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Shift in the Demand Curve
This demand curve has shifted to the right. Quantity
demanded is now higher at any given price.
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Shift in the Demand Curve
• A change in any variable other than price that
influences quantity demanded produces a shift in
the demand curve or a change in demand.
• Factors that shift the demand curve include:
–
–
–
–
Change in consumer incomes
Population change
Consumer preferences
Prices of related goods:
• Substitutes: goods consumed in place of one another
• Complements: goods consumed jointly
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Shift in the Supply Curve
For an given rental price, quantity supplied is now lower
than before.
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Shift in the Supply Curve
• A change in any variable other than price that
influences quantity supplied produces a shift in
the supply curve or a change in supply.
• Factors that shift the supply curve include:
– Change in input costs
– Increase in technology
– Change in size of the industry
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Price Ceilings and Floors
Prices can be set by the government to either be
higher or lower than equilibrium. Why would the
government interfere with prices to make them
higher or lower?
https://www.youtube.com/watch?v=1EzY4Vl460
U&t=123s – Floors and ceilings
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Price Ceilings & Floors
• A price ceiling is a legal maximum that can be
charged for a good.
– Results in a shortage of a product
– Common examples include apartment rentals and
credit cards interest rates.
• A price floor is a legal minimum that can be
charged for a good.
– Results in a surplus of a product
– Common examples include soybeans, milk,
minimum wage
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Price Ceiling
A price ceiling is set at $2 resulting in a shortage of
20 units.
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Price Floor
A price floor is set at $4 resulting in a surplus of 20
units.
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Exit Slip
On your own paper, draw a simple coordinate
graph that shows the following: labeled axes,
labeled demand line, labeled supply line,
equilibrium, shortage and surplus (dashed) lines,
and a curve shift (use a pointing arrow) that
changes equilibrium.
Explain below the graph why the supply or
demand curve moved in the direction you
indicated with the arrow.
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Supply and Demand
On your own sheet of paper with shoulder partners,
NEATLY do the following:
1. Free sketch a graph and label the supply and demand axes
2. Freehand what a demand curve on the graph looks like and
write the Law of Demand.
3. Freehand what a supply curve looks like and write the Law
of Supply
4. Draw a sketch to show how we determine the price of a
product using supply and demand and label it with the correct
term.
5. On the top grid of the sheet you were given, graph the
information that is on the board and determine the equilibrium.
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