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5 Steps to Graphing Heaven Price (P) Step 1- Draw the starting S and D Graph A. Draw the axes S B. Label the axes C. Draw the curves D. Label the curves P0 E. Find the intersection D 0 Q0 Quantity (Q) F. Label the starting price (P0) and quantity (Q0) 5 Steps to Graphing Heaven Step 2- Read the situation and answer questions 1, 2, and 3 Situation- Consumers love big screen TV’s. What impact does this have on the price and quantity of big screen TV’s? Taste! 1. Which determinant of supply or demand is affected? Refer to #14 & 15 on your notes! Demand Determinants (SEPTIC) 1. Substitutes 2. Expectations 3. Population 4. Taste 5. Income 6. Complements Supply Determinants (GETNoCredit) Government Policies Expectations Technology Number of Suppliers Cost of Production 5 Steps to Graphing Heaven Step 2- Read the situation and answer questions 1, 2, and 3 Situation- Consumers love big screen TV’s. What impact does this have on the price and quantity of big screen TV’s? 2. What is affected supply or demand? Demand! 3. Which way does the curve shift? Away from 0, from D0 to D1 5 Steps to Graphing Heaven Step 3- Draw the shift and label everything Price (P) S P1 P0 D1 D0 0 Q0 Q1 Quantity (Q) 5 Steps to Graphing Heaven Step 4- Answer question 4 Price (P) S P1 4. Movement along which curve? ∆Qs; Movement along the S curve. P0 D1 D0 0 Q0 Q1 Quantity (Q) 5 Steps to Graphing Heaven Step 5- Answer questions 5 (both parts) Price (P) S 5. What happens to price? Price increases from P0 to P1. P1 P0 D1 D0 0 Q0 Q1 Quantity (Q) 5 Steps to Graphing Heaven Step 5- Answer questions 5 (both parts) Price (P) S 5. What happens to quantity? Quantity increases from Q0 to Q1. P1 P0 D1 D0 0 Q0 Q1 Quantity (Q) Determinants of Demand and Supply 11. Determinants of Demand: Reasons for Change/ Shift in Demand (SEPTIC) A change in: Price of Substitutes- things that replace each other: pork v. beef, pinto beans vs. black beans, TV shows and video rentals (If P of Substitute ↑, D for other good ↑) (If P of A ↑, D for B ↑). Consumer Expectations-if they expect a change in prices or their income Determinants of Demand and Supply 11. Determinants of Demand: Reasons for Change/ Shift in Demand (SEPTIC) A change in: Population: Number of consumers, more or less people Consumer Taste- preferences, styles, fads, fashion, health, advertising, popularity Determinants of Demand and Supply 11. Determinants of Demand: Reasons for Change/ Shift in Demand (SEPTIC) A change in: Income (y) (If Y ↑ , D ↑. If Y↓, D↓) Steak, Sports Car Price of Complements- things that go together: ketchup and fries; movies and popcorn, cars and gasoline (If P of Complement ↑, D for other good ↓) (If P of A ↑, D for B ↓). Determinants of Demand and Supply 12. Determinants of Supply: Reasons for Change/ Shift in Supply (GETNoCredit) A change in: Government Policies - taxes, regulations,tariffs, quotas, setting prices, or any other government action. Expectations- businesses expect a change to occur to sales, profits, etc. Determinants of Demand and Supply 12. Determinants of Supply: Reasons for Change/ Shift in Supply (GETNoCredit) A change in: Technology- increases the efficiency of your natural, human, capital, and entreprenuership resources. Number of Suppliers- Companies entering or leaving the market. Determinants of Demand and Supply 12. Determinants of Supply: Reasons for Change/ Shift in Supply (GETNoCredit) A change in: Costs of Production- anything that increases or decreases the cost of your land , labor, capital, and entrepreneurship.