Download Module Supply and Demand: Introduction and Demand

Module 5
Supply and Demand:
Introduction
and Demand
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• What a competitive market is and how it is
described by the supply and demand
model
• What the demand curve is
• The difference between movements along
the demand curve and changes in
demand
• The factors that shift the demand curve
Supply and Demand: A Model of a
Competitive Market
• Competitive Market
• Supply and Demand Model
i
The Demand Curve
• Demand schedule: Shows how much of a product consumers are
willing & able to buy at each series of possible prices during a specified time period.
• Quantity demanded: Quantity demanded depends on price at any
given pt on the curve
• Demand curve: graph that illustrates the quantity demanded at each
given price- inverse relationship
• Law of Demand: all other things being equal- as the price increases,
the corresponding quantity demanded falls.
Demand Schedule and
Demand Curve
Price
Quantity
Price
Quantity
$8
3
$7
5
$6
7
$5
10
$4
12
$3
16
$2
22
Understanding Shifts of the
Demand Curve
• Increase = right, Decrease = left
• M.E.R.I.T. shifts demand
• market size (number of consumers)
• expectations
• related prices (complements, substitutes)
• income (normal, inferior): As income rises increase in
demand for normal goods, reverse for inferior goods. Steak-normal,
second hand clothing –inferior
Common Student Difficulties
• Do not confuse movement along the demand
curve with how it differs from a shift in the
entire demand curve.
• Movement and Shifting are different
• Precise use of language matters:
• Correct: “A decrease in the price of tacos
causes an increase in the quantity of tacos
demanded.
• Incorrect: “A decrease in the price of tacos
causes an increase in the demand for tacos”
Drawing a Demand Curve
• A private parking space on campus:
• A new Mac Notebook:
• Concert tickets to _________________ :
• An I phone 6:
• Visits to a tanning salon and spa:
• An Apple Watch:
• Seasons tickets to Panther Football Games:
• A Kindle Fire :
• A new X-Box game system :
• An AK yearbook
• A car stereo system/including sub woofers and amp
_______________________________________________________________________
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1. Teams will brainstorm five possible prices for their product from high to low.
2. Teams agree on how all members will conduct the survey. For Ex: “If the price is __
how many will you buy (in a wk, a month, a year) or if the price is ___ will you buy it?” If
yes is counted as 1 and not is counted as 0.
3. Each team member interviews 2 students in the class regarding their demand for the
team’s product.
4. Students return to the team and add the quantity demanded at each price for all team
member surveys
5. Teams draw the demand curve for their product and post it on the board.