Download Economics Unit IIA Typed Notes

Unit II (A)
Supply + Demand
I) Demand
Law of Demand – a rise in price leads to a fall in quantity demanded.
( P = D) ( P = D)
Defined – quantity of a product wanted at each of its possible prices. Ex.
Jars of Peanut Butter
A) Factors that Affect Demand
(Determinants)
1) Price of product
2) Tastes/Preferences of consumer
3) Changes in income (loss of job or new)
4) Prices of substitutes and compliments
5) Expectations and attitude toward product may change….
B) Examples of Factors
Substitutes – Adirondack vs. Coke; Lays vs. Wise; Lee vs. Levi.
Role of Generic Brands
Compliments – Popcorn + Salt; Milk + Cereal; Pens + Paper
Expectations that Change – Firestone Tires; Extra Strength Tylenol; Burger King Kid
Toys; “New and Improved”; “Low Fat”
II) Demand in Poland
Identify ten items that are sufficiently demanded in the Poland area:
Considerations
1) Demographics – the study of people, population breakdown, gender, race in a given
area.
2) Location – “Location, Location…”
3) Economic Conditions – income, age, area growth, or lack there of
4) Market Saturation – the extent to which products are already offered in the area
demanded… paper products, fast-food, pharmacy, funeral homes?
III) Supply
Law of Supply – A rise in price leads to an increase in quantity supplied. (A business’
point of view).
( P = S)
( P = S)
Defined – the quantity of a good or service that producers will provide at each of its
possible prices.
A) Factors That Affect Supply
Price of product
Costs of Resources
Technology – efficiency
Prices of Substitutes/Compliments
Seller’s Expectations for Profit
Government Regulation
Natural Events
# of Sellers of that Product
B) Examples of Factors (Supply)
1) Price – workers at a sparkplug plant go on strike…cost of cars goes up
2) Natural Events – Hurricane Katrina reduces available supply of natural gas.
3) Tech – New software will revolutionize digital camera business. Lithium Batteries
4) Gov’t Reg. – new gov’t tariffs raise prices of foreign made dvd players.
5) Substitutes – Hot dog scandal affects hamburger market.
6) Expectations – New Playstation IV is released.
IV) Suppliers in Poland
More than you may believe
Please Identify at least 10 suppliers of goods and services in the Poland area:
V) Supply and Demand
Note: where the two curves intersect represents the “market” or “equilibrium” price of
the product.
The curves are always shifting. “Snapshot in time”
VI) Elasticity of Supply/Demand
A) Elasticity of Demand – the degree to which changes in price (P) causes a change in
the amount demanded.
1) Demand for cars changes as price changes… Honda Accord
- If price went from $24,000 to $29,000,
demand would decrease.
(Elastic)
Or
- If price of Homes went down after WWII as in Levittown, then demand
would increase. (Elastic)
Or
- gasoline (Inelastic)
B) Keys – Relative Need for Product, Cost of Product, Viability of a substitute.
C) Examples: Oil? Gum? Doritos? TV?
Milk? Couch? Washing Machine?
In the space below, please draw an accurate sample for either the Honda/Car scenario,
or the World War II Homes scenario:
Samples:
D) Elasticity of Supply – the degree that amount supplied changes as price changes.
Ex. 1: Bread – easy to make, common resources, increasing or decreasing the supply is
easy (Thus, it is elastic)
Ex. 2: Cars – complex factors involved in production; high overall cost. Increasing or
decreasing supply is tough. (Thus, inelastic)
1) Key – Costs of Production.
Samples:
SAMPLE
In the space below, please draw an accurate sample for s product of your choosing (may
not be related to samples already provided):
Supply/Demand Quiz!
Multiple Choice: Essentials of S+D
Graphing: Demand, Supply, Shifts in Supply and Demand (Elasticity)