Download Law of Supply- The supply of an economic product varies directly

Ch 11
Law of Supply- The supply of an economic product varies directly with its price.
If there is an increase in the price, suppliers will try to sell more.
If there is a decrease in the price, suppliers will offer less for sale.
Law of Demand- the demand of an economic product varies inversely with its price.
If there is an increase in the price, consumers will purchase less.
If there is a decrease in the price, consumers will purchase more.
This can be illustrated with the supply and demand graph.
Change in supply or demand is shown by a shift of the curve, signifying that supply or
demand changes regardless of the price. This happens if supply or demand changed due to
something other than a change in price.
Change in quantity supplied, or Change in quantity demanded is shown by a shift along
the existing curve, showing that a change in price caused the shift.
Ch 12
Price Controls
Price Floors and Price Ceilings.
Sometimes the government will try to influence the market by using price controls. Both of these
can have positive and negative effects.
Price Floors are the Lowest legal price that can be paid for a product. These try to help raise
the price to help the businesses. This is set ABOVE the equilibrium, or market price. These may
result in a surplus of goods.
Price Ceilings are the Maximum legal price that a product can be sold for. Ceilings try to help
consumers by lowering the price, so they are set BELOW the Equilibrium. These may result in a
shortage of goods.
Price
Supply & Demand for Wheat Late 1920's
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Supply
Demand
0
100
200
300
400
Quantity(x 100,000 bu)
500
600