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Demand review
•
Demand graphs can be read in two
ways:
1. As price decreases, demand
increases
2. As price increases, demand
decreases
Demand review
• When factors other than price effect the
demand- the change in the graph is called a
“demand curve shift”
• When the price effects demand we see
change/movement along the demand curve
• Demand Elasticity: responsiveness of
quantity demanded to a change in price.
Ex. Drug addicts want to get “high” no matter
how much the price increases. Certain
quantities of life saving drugs are needed
no matter what the cost=inelastic. If a
resturant can get a better deal on
ketchup x vs. y they will buy x (both
taste the same and are needed in large
Sumarizing Supply
The ability and willingness of sellers
to make goods and services
available for sale
Effect of price on quantity
supplied
When all other factors remain
unchanged…
*price increases- quantity supplied (s)
increase (s)
*price decreases-quantity supplied (s)
decreases
Changes in Demand &
Supply
• Demand: changes in tastes, incomes,
availability of related items, political
sentiments, population growth/decline…
• Supply: changes in production methods
(technology) and costs, weather, politics…
Supply
• Key concept= supplying things is costly and
we must pay ppl to supply things we want.
The more we want them to supply, the higher
their costs of supplying each additional unit.
The cost of production increases with each
additional unit.
Graphs
• Don’t think of supply as what the
producer wants in exchange for the
good but rather at what minimum is the
producer willing to give up their good
(due to costs)