Download No Slide Title

Chapter 3- Individual Markets
Objective – Students will be able
to answer questions regarding
supply and demand.
© 2001 by Prentice Hall, Inc.
•SECTION
•1
Equilibrium
• When supply = demand, there is
equilibrium in the market
• Equilibrium creates a single price and
quantity for a good/service
Market Equilibrium
P
S
p
D
q
Q
Shortage and Surplus
• If the market price is above equilibrium,
the quantity supplied exceeds quantity
demanded (surplus), and the price
automatically is pushed down to
equilibrium.
• If the market price is below equilibrium,
the quantity demanded exceeds quantity
supplied (shortage), and the price
automatically is pushed up towards
equilibrium.
There are four steps in figuring out supply
and demand graphs:
1. DON’T OVERTHINK!
2. Which curve is affected and why?
3. Is it an increase or a decrease?
4. JUST DRAW IT!
What happens to the market for oranges when
there is a frost that hits Florida?
S1
P
S
Decrease in
the physical
availability
of resources.
P1
P
D
Q1 Q
Your market is:
Oranges
Q
What happens to the market for downloaded music
when the price of an MP3 player or Ipod goes down?
P
S
Decrease in
the price of
a complement.
P1
P
D1
D
Q
Your market is:
Q1
Q
Downloaded Music
What happens to the market for downloaded
music when the royalties paid to the song
artist goes
up?
S1
P
S
Increase in
costs.
P1
P
D
Q1 Q
Your market is:
Q
Downloaded Music
The U.S. goes through a boom economy, what
happens to the market for steak?
P
S
Increase in
incomes—
Normal goods.
P1
P
D1
D
Q
Your market is: Steak
Q1
Q
The price of milk doubles; what happens to
the market for cereal?
Section 1 Assessment
1. Graph what happens to the market for
Nike shoes after a major advertising
campaign.
2. Graph what happens to the market for
computers if Hewlett Packard decides to
stop producing them.
• Summary: In a paragraph, describe
what you have learned today.