Download Supply and Demand - Appoquinimink High School

Shifts in Supply and
Demand
Today’s LEQ: How do
markets operate? (continued
from yesterday)
First, Let’s Review Demand…


Demand = the total
amount consumers
are willing and able to
buy at all prices.
Demand Curve = the
graphical
representation of
what consumers are
willing and able to
buy.
 Law
of Demand: As price
increases (decreases), quantity
demanded decreases (increases).
P
Q
P
Q
Next, Let’s Review Supply…


Supply = the total
amount of a good or
service producers are
able to make at all
prices
Supply curve = the
graphical
representation of a
good or service
producers are able to
make at all prices.
 Law
of Supply: as price
increases (decreases) quantity
supplied increases (decreases)
P
Q
P
Q
 Equilibrium
Point: the point at which
the quantity & the price are equal
Shifts in Supply and Demand

Some factors
cause supply and
demand to shift
 Represented
by
the movement of
the entire curve

Changes in QS or
QD are
represented by
movement along
the corresponding
curve
Assuming Perfect Competition…

Five factors must be present:
 Unlimited
number of buyers and sellers
 Standardized product
 Free entry and exit
 Perfect knowledge of price
 Perfect economic decisions (people act in
their own best self-interest)
Factors that cause demand to
change or shift
Tastes and fads
 Income
 Number of buyers
 Future price expectations
 Price and availability of:
Substitutes (i.e. Coke and Pepsi)
Compliments (i.e. peanut butter and
jelly)

Factors that cause a change in
supply:
 Price
of land, labor or capital
 Technology
 Number of other sellers
 Price of other goods I could
produce
 Tax policy
IRDL the Turtle 
“IRDL” will help
you!
 INCREASE =
RIGHT
 DECREASE =
LEFT