Download supply & demand

SUPPLY & DEMAND
4.1 - 4.2 & 5.1 - 5.2
Demand

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
demanded of any good is the amount
The quantity
____________
of the good that buyers are willing and able to
purchase at a certain price.
DEMAND
____________
is the want for a product or
service.
____________:
the claim that the quantity
Law of demand
demanded of a good falls when the price of the
good rises, other things equal
BUYERS
Demand is from the ___________
perspective!
LAW OF _____________
DEMAND in simpler
words….


When something is cheaper, people buy
___________
of it.
MORE
When something is more expensive, people buy
LESS
___________
of it.
EXAMPLES
•When BIG MACS are TWO for TWO…people tend to
purchase more BIG MACS when they visit McDonalds
•When the PS3 came down in price from $799 to $299,
they sold more
The Law of Demand in PICTURE form
Zakk’s Demand Schedule & Curve
(P) Price
of Lattes
Price Quantity
of
of lattes
lattes demanded
$0.00
16
1.00
14
2.00
12
3.00
10
4.00
8
5.00
6
6.00
4
Curve
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
D
$0.00
0
5
10
15
(Q)Quantity
of Lattes
Schedule
!!! REMEMBER !!!
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A demand curve or schedule graphically define
the LAW OF DEMAND
A demand curve line SWOOPS DOWN TO
THE GROUND like a crashing plane
A demand graph ONLY shows us how PRICE
affects our demand for products and services!!!
CLASS DISCUSION #1

When you purchase something, what are
THREE things you consider before you
purchase it OTHER THAN PRICE?
EXAMPLES
Color
Quality
Is it comfortable or do I look good in this
Is it popular
Brand Name
Value (do I get a lot for the money)
How much use am I going to get out of it
Taste
Demand Curve Shifters
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The demand curve shows how price affects
quantity demanded, other things being equal.
These “other things” are non-price determinants
of demand (i.e., things that determine buyers’
demand for a good, other than the good’s price).
Changes in them shift the D curve…
Things that have POSITIVE affects on
Demand will shift the line RIGHT
Things that have NEGATIVE affects on
Demand will shift the line LEFT
Example of Demand Curve Shift:
Suppose the number
of buyers increases.
Then, at each P,
Qd will increase
(by 5 in this example).
P
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
D2
Q
$0.00
0
5
10
15
20
25
30
Things that affect (shift) DEMAND
other than price levels
#
of buyers
 Change in people’s income
 Prices of related goods (ie peanut butter and jelly)
 Fads or Popularity
 Future Expectations
CLASS DISCUSSION #2
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Which way will DEMAND shift for PIZZA if
10,000 more people move to Shelby Township?
Which way will DEMAND shift for
ABERCROMBIE clothes if people find out
they give you body rashes?
Which way will DEMAND shift for
MUSTARD if it is proven to cure CANCER?
REMEMBER!!!
DEMAND DOES
NOTfor
SHIFT
IF MACS
Which !!!way
will DEMAND
shift
BIG
THERE IS A CHANGE IN PRICE, RATHER,
if Athey
come
down
in price?
CHANGE IN PRICE
MOVES
YOU ALONG THE CURVE…ONLY
NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!
Supply




quantity supplied of any good is the amount
The ____________
that sellers are willing and able to sell at a certain
price.
SUPPLY
____________
is the amount of a product or
service.
Law of Supply
____________:
the claim that the quantity
supplied of a good rises when the price of the
good rises, other things equal
SELLERS
Supply should be studied from the _________
perspective!
LAW OF _____________
SUPPLY in simpler
words….


When something is cheaper, STORES put
___________
of it on the shelves.
LESS
When something is more expensive, STORES
MORE
put ___________
of it on the shelves.
EXAMPLES
•If prices are going up for sunglasses because the
demand is increasing in the summer…stores supply
more of them.
•On Black Friday there will be a small supply of
cheaply priced Computers however after the Holidays
there will be a large supply.
The Law of Supply in PICTURE form
Starbucks’ Supply Schedule & Curve
Curve
P
$6.00
S
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
Q
0
5
10
Price Quantity
of
of lattes
lattes supplied
$0.00
0
1.00
3
2.00
6
3.00
9
4.00
12
5.00
15
6.00
18
15
Schedule
!!! REMEMBER !!!



A supply curve or schedule graphically define
the LAW OF SUPPLY
A supply curve line SWOOPS UP TO THE
SKY like an airplane taking off
A supply graph ONLY shows us how PRICE
affects the supply of products and
services…however…there are other
determinants
CLASS DISCUSION #3

If you are a store owner, what are THREE
things you consider before you order goods to
put on the shelf OTHER THAN PRICE?
EXAMPLES
Color that is in
Quality
Is it popular or a fad right now
Brand Name popularity
Value (Are people going to get a lot for their money)
How much people need or want it
Supply Curve Shifters





The demand curve shows how price affects
quantity supplied, other things being equal.
These “other things” are non-price determinants
of supply (i.e., things that determine sellers’
supply of a good, other than the good’s price).
Changes in them shift the S curve…
Things that have POSITIVE affects on Supply
will shift the line RIGHT
Things that have NEGATIVE affects on
Supply will shift the line LEFT
Example of Supply Curve Shift:
P
$6.00
S2
$5.00
$4.00
$3.00
$2.00
Suppose the
price of milk falls.
At each price,
the quantity of
Lattes supplied
will increase
(by 5 in this
example).
$1.00
Q
$0.00
0
5
10 15
20 25 30
35
Things that affect (shift)
SUPPLYother than price levels
#
of sellers
 Change in people’s income
 Prices of related goods (ie peanut butter and jelly)
 Fads or Popularity
 Input prices
 Technology increases
CLASS DISCUSSION #4
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Which way will SUPPLY shift for PIZZA if 40
more pizza shops open up in Shelby Township?
Which way will SUPPLY shift for
ABERCROMBIE clothes if they are popular
right now?
Which way will SUPPLY shift for MUSTARD if
it is proven to give you CANCER?
!!! REMEMBER!!!
SUPPLY DOES
Which way
will SUPPLY
shiftNOT
forSHIFT
BIGIFMACS if
THERE IS A CHANGE IN PRICE, RATHER,
they
come
in price?
A CHANGE INdown
PRICE MOVES
YOU ALONG THE CURVE…ONLY
NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!