Download I: The Law of Demand

How does the price of an item affect the
demand?
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A: Demand is the desire to own something
and the ability to pay for it.
B: The law of demand says that when a
good’s price is lower, consumers will buy
more of it. When the price is higher ,
consumers will buy less of it.
C: Market demand: the total demand of all
consumers for their product or service.
Increase or decrease in income
 Population change
 Changes in consumer preferences (tastes)
 Expectations
 Change in related products-Complements
 Change in related products-Substitutes
A change in any of these areas will cause
demand to increase or decrease and the
demand curve to shift right (increase) or shift
left (decrease)
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I: The Law of Supply
◦ A: Supply is the amount of goods available.
◦ B: According to the Law of Supply, the higher the
prices, the larger the quantity produced. As the
price falls, quantity supplied falls. (If the price is
high, there’s too much supply).
◦ C: The total of all supply schedules for businesses
that provide the same goods or service is called the
market supply.
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Productivity
Technology
Government Policies
Taxes
Subsidy
Cost of Resources
Expectations
Number of Suppliers
Unforeseen event
If supply increases the supply curve shifts right
and if supply decreases the supply curve shifts
left.
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I: Combining Supply and Demand is how the
market balances.
A: Defining Equilibrium
1. The point where demand and supply come
together.
2. equilibrium is the point of balance between
price and quantity.
3. Supply = Producer
4. Demand = Consumer
5. Equilibrium = win win for both C&P