Download Supply and Demand Notes

Law of Supply
Supply and Demand Notes
The ________________________________ states that as the market price of a good or a
service increases, the quantity supplied in the market will also increase:
______________________________________. (Note ceteris paribus is a Latin term that
means “everything else held constant.”)
Supply
 __________________________ is the relationship between market price and the
amount of goods and services produced in the economy.
 1. The __________________________ is a graphical depiction of the relationship
between price and quantity supplied. The supply curve slopes upward, so it
is positively sloped.
Supply Cont.…
 2. Changes in market price will only change _________________________________,
which is a movement along the supply curve.
 3. All non-price, supply-related changes in the market will shift the supply
curve left or right.
Non-price changes that shift the supply curve
 1. The ______________________in the market will influence the supply curve. An
increase in the number of sellers in the market will shift the supply curve
right.
 2. ________________________ will influence the supply curve. Technologies that
make production more efficient will shift the supply curve to the right.
 3. ________________________will influence the supply curve. An increase in the price
of inputs will shift the supply curve to the left.
 4. ________________________will influence the supply curve. If producers expect
demand for their goods and services to increase, then the supply curve will
shift right.
 5. Prices of other goods the firm could produce will influence the supply
curve. If the prices of other goods the firm could produce rise, then the
supply curve will shift left.
Law of Demand
 The ____________________ states that as the market price of a good or a service
increases, the quantity demanded of that good or service decreases: ceteris
paribus.
Demand
 _________________________ is the relationship between market price and the
amount of goods and services purchased in the economy.
 1. The _____________________is a graphical depiction of the relationship between
price and quantity demanded. The demand curve slopes downward, so it is
negatively sloped.
 2. Changes in market price will only change _______________________, which is a
movement along the demand curve.
 3. All non-price, demand-related changes in the market will shift the demand
curve left or right.
Non-price changes that shift the demand curve
 1. The ________________________in the market will influence the demand curve. An
increase in the population in the market will shift the demand curve right.
 ________________________will influence the demand curve. When consumers
develop a stronger preference for a good or a service, the demand curve will
shift right.
 ________________________will influence the demand curve. An increase in
consumers’ income will shift the demand curve to the right.
 ___________________________will influence the demand curve. If consumers expect
the price of a particular good or service to increase, the demand curve will
shift right.
 ___________________________consumers can buy will influence the demand curve.
 If the price of ___________________________rises, the demand curve will shift
left. For example, if the price of buns increases, the demand for hot
dogs will shift left.
 If the price of a ___________________________rises, the demand curve will
shift right. For example, if the price of hamburgers increases, the
demand for hot dogs will shift right.
Government Impact on Supply and Demand
Governments can use taxes and subsidies to influence supply and demand.
Subsidies
 Governments can provide additional funds to consumers in the form of a
__________________________ (monetary assistance) to purchase a specified good or
service.
 Subsidies will encourage consumers to purchase more of the subsidized good
or service. This will shift the demand curve to the right.
 Governments may use subsidies to encourage the adoption of efficient
technologies that might be too costly for consumers to purchase.
 Governments can provide additional funds to producers in the form of a
subsidy so they can produce more of a specified good or service.
 Subsidies encourage producers to supply more of the subsidized good or
service. This will shift the supply curve to the right.
 Governments may use subsidies to encourage the production of goods and
services that benefit society.
Taxes
 Governments can tax consumers to discourage the purchase of a specified
good or service.
 ____________________ (extra fees/charges levied by the government) will
discourage consumers from purchasing certain goods or services. This will
shift the demand curve to the left.
 Governments may use taxes to reduce the demand for products that are
harmful to society. For example, a tax exists on tobacco products, which have
been shown to affect public health negatively. Such taxes are frequently
called “sin taxes.”
 Governments can tax producers to discourage the supply of a specified good
or service.
 Taxes will discourage producers from supplying the taxed good or service.
This will shift the supply curve to the left.
 Governments may use taxes to reduce the supply of a product that is harmful
to society.