Download Supply and Demand Notes

POWERPOINT NOTE PACKET: DEMAND, SUPPLY, & PRICE
CHAPTERS 4, 5, & 6
Chapter 4: What is Demand?

Demand - _____________________________________________________________________
_________________________________________________________________________

____________________ individually and collectively have a great influence on the price of
all goods and services.

Supply - _______________________________________________________________________
_______________________________________________________________________________

_____________________ - people who want to sell items decide how much to sell and at what
price.

A _____________ represents actions between buyers and sellers

Voluntary Exchange - ___________________________________________________________
_______________________________________________________________________________

Demand Schedule - ______________________________________________________________
_______________________________________________________________________________
*CONSTRUCT A DEMAND SCHEDULE USING THE FOLLOWING INFORMATION:
*see page 90 for an example
A local movie theatre does an experiment every Monday afternoon to see how many people will come see
a movie at different prices. Here is what they found: at $2 per ticket 500 people bought tickets, at $4
per ticket 400 people bought tickets, $6 = 300, $8= 200, $10 = 100.
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________ per movie ticket
(in dollars)
____________ of movie
tickets ______________
$2
500 tickets
Use the information from the demand schedule to CONSTRUCT A DEMAND CURVE. Plot the
points first, and then connect them. Label the line D1.
*Make sure to include: a title, labels for the x and y axis, and numbers that are labeled consistently

____________________ graphs the quantity demanded of a good or service at each possible
price.

The Law of Demand - __________________________________________________________
________________________________________________________________________________
1) As price _________, the quantity consumers demand goes _________
2) As price _________, quantity demanded goes ________

More will be demanded at LOWER prices and less at HIGHER prices

There is an ____________ relationship between price and quantity demanded
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TOTAL REVENUE= _________________ X ____________________
TR= P x Q
At which price will the movie theater make the most money (or maximize their profit)? ________________
Shifts in Demand
Draw an INCREASE in Demand
Draw a DECREASE in Demand
______________________________________________________
Draw an INCREASE in QUANTITY DEMANDED

Draw a DECREASE in QUANTITY DEMANDED
What is a change in quantity demanded? (pg. 95) _______________________________________
_______________________________________________________________________________
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First Can
____________________is the term used to
mean customer satisfaction, or the power a
good or service has to satisfy a want.
Example: ___________________________
Second Can
Third Can
Fourth Can
Fifth Can

Marginal Utility - _______________________________________________________________
_______________________________________________________________________________

Law of Diminishing Utility - ______________________________________________________
SECTION 2: FACTORS AFFECTING DEMAND
What are some reasons that people substitute one product for another?
What are some reasons that people continue to buy a product despite its price?

Income effect _______________________________________________________________________________
_______________________________________________________________________________

Substitution effect - _____________________________________________________________
_______________________________________________________________________________
DETERMINANTS of Demand (Define and give and example for each)  pages 96-99
Define “change in demand” using pg. 96 -1. Changes in Consumer Income --
2. Changes in Consumer Tastes --
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3. Changes in the Prices of Substitutes --
* Define substitutes and give examples --
4. Changes in the Prices of Complements –
* Define complements and give examples --
5. Change in Consumer Expectations --
6. Changes in Population --
7. Advertising --
SECTION 3: ELASTICITY OF DEMAND

How much consumers respond to a given price is _____________________.

_________________________ occurs when the demand for some goods is greatly affected by
the price

Give two examples of elastic goods?
Inelastic Demand - _______________________________________________________________
_______________________________________________________________________________

Give two examples of inelastic goods:
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Draw Elastic Demand
Draw Inelastic Demand
Chapter 5: What is Supply?

______________ is the willingness and ability of producers to provide goods to the consumer.

_____________________- As prices rise, the quantity supplied generally rises. As prices fall,
the quantity supplied falls (Direct Relationship).
Shifts in Supply
Draw an Increase in Supply
Draw a Decrease in Supply
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Define a “change in quantity supplied” (see pg.
115) --
Change in Quantity Supplied
Supply Shifters (Define and give an example for each) – pgs. 116-118
1. Cost of Inputs
2. Productivity
3. Technology
4. Taxes and Subsidies
* define subsidy 5. Expectations
6. Government Regulations
7. Number of firms/sellers
Section 2: DIMINISHING RETURNS

Law of Diminishing Returns (pg. 125) ______________________________________________________
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Chapter 6: Prices and Decision Making

Price – ________________________________________________________________________
_______________________________________________________________________________

The Advantages of Prices (pgs. 137-138) -- __________________________________________
_______________________________________________________________________________

Allocations Without Prices = Rationing (pg. 139) – ___________________________________
_______________________________________________________________________________

_________________________- market where prices are made illegally and products are sold
illegally.

How do sellers often time try to convince buyers to agree to the price of a product?

Why do higher prices encourage more competitors to enter an industry?
o Increase in price and increase in production leads to an increase in profits.
o Higher prices encourage more competitors to join the market.
o Higher prices turn potential suppliers into actual suppliers, adding to the total output.
Equilibrium Price (pg. 144) - ______________________________________________________
_______________________________________________________________________________
Draw Equilibrium and label the equilibrium price
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Factors Affecting Market Price
•Supply factors
1. Supply increases, demand stays the same: Price will __________
2. Supply decreases, demand stays the same: Price will __________
•Demand factors
1. Demand increases, supply stays the same: Price will __________
2. Demand decreases, supply stays the same: Price will __________
Surplus (Define/Draw)-
Shortage (Define/Draw)-
Price Ceilings (Define/Examples)-
Price Floors (Define/Examples)-
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