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Demand you Da-man DEMAND-Always refers to the buyer/consumer of a product. • Supply and Demand Song Money Can’t buy me love • Link Lyrics • Can't buy me love, love Can't buy me love I'll buy you a diamond ring my friend if it makes you feel alright I'll get you anything my friend if it makes you feel alright 'Cause I don't care too much for money, money can't buy me love I'll give you all I got to give if you say you love me too I may not have a lot to give but what I got I'll give to you I don't care too much for money, money can't buy me love Can't buy me love, everybody tells me so Can't buy me love, no no no, no Say you don't need no diamond ring and I'll be satisfied Tell me that you want the kind of thing that money just can't buy I don't care too much for money, money can't buy me love • Does money have any intrinsic value? What are the functions of money? How does demand for money affect its supply? How do you think the supply of money versus the supply of diamonds has changed since the since the Beatles wrote this song? What's the reason for the difference? Although money can’t buy love, money can buy a diamond ring. How does the money supply change today if you pay for the diamond ring with credit as opposed to a debit card? Supply and Demand • Song • My boss he's a probable bore. Put me hands and knees on scrubable floor. Do it right receive the lions share bliss. Know all too well just where that ration is. Learned a lot about the company doe. Learned less about receiving it though. Saw how it came to those who always sat pretty. Don't need it. Supply and demand. My girl had a probable cause or so she said and took a probable pause. I was dumped for occupying her time. I asked her why and what was next in line. She said "Shiny hair that's my life ambition but I'll devote my time to a new omission the rizzle-razzle kitsch of paranoid city". Don't need it. Supply and demand. Supply and demand. • Draw a supply and demand diagram that shows the boss receiving “the lions share bliss” while someone who scrubs floors gets much less. In other words, what factors would affect supply and demand such that CEO’s receive 300 times the compensation of average workers? Are CEO’s paid too much? Price Demand Curve always looks like this. You can look at it as going down. What do you notice about the relationship between price and quantity? D1 Quantity THE LAW OF DEMAND (Memorize this) AS PRICES GO UP PEOPLES DEMAND FOR PRODUCT GOES DOWN AS PRICES GO DOWN PEOPLES DEMAND FOR PRODUCT GOES UP. The Demand Curve: The Relationship between Price and Quantity Demanded • Demand Schedule – The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded. DEMAND SCHEDULE Price Quantity 10 1 9 2 8 3 7 4 6 5 Catherine’s Demand Schedule © 2007 Thomson South-Western The Demand Curve: The Relationship between Price and Quantity Demanded • Demand Curve • The demand curve is a graph of the relationship between the price of a good and the quantity demanded. © 2007 Thomson South-Western Figure 1 Catherine’s Demand Schedule and Demand Curve Price of Ice-Cream Cone $3.00 2.50 1. A decrease in price ... 2.00 1.50 1.00 0.50 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones 2. ... increases quantity of cones demanded. © 2007 Thomson South-Western Shifts in the Demand Curve • Change in Quantity Demanded • Movement along the demand curve. • Caused by a change in the price of the product. © 2007 Thomson South-Western Changes in Quantity Demanded Price of IceCream Cones B $2.00 A tax on sellers of icecream cones raises the price of ice-cream cones and results in a movement along the demand curve. A 1.00 D 0 4 8 Quantity of Ice-Cream Cones © 2007 Thomson South-Western A PRICE CHANGE ALSO KNOWN AS A MOVEMENT ON THE CURVE OR LIKE DAY LIKES TO SAY A DOT TO DOT Price QD 5 Notice the price is going down so what happens to the quantity demanded 4 D1 10 20 Quantity Price can also go up. What happens to Quantity Demanded? Price QD 5 Notice the price is going up so what happens to the quantity demanded 4 D1 7 25 Quantity DOT TO DOTS • PRICE CHANGES ARE ALWAYS MOVEMENTS ON THE CURVE. • EXAMPLE SOMETHING GOES ON SALE!!!! • ARROW GOES UP OR DOWN BASED ON WHAT THE PRICE IS DOING!!!!! Price QD D1 Quantity Price QD D1 Important Note- This is what the graph looks like only if the PRICE of the product has changed!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!! Quantity Price QD PRICE CHANGE!!!!!!!!!!!!! !!!!!!!!! D1 Quantity So you have learned what a price change looks like now lets look at something else. • Shifts in Demand!!!!!!!!!!!!!!!!!! These are when people want to buy or not buy a product for any other reason besides the price changing!!!!!!!!!!!!! ANY OTHER REASON Price Change Price QD D1 Change in Demand D P r i c e d2 d1 Quantity Price Quantity QD D1 Quantity P r i c e D d1 d2 QD Vs Change in D • To help reveal the difference, I draw a graph relating the time that a student spends preparing for an exam to his expected grade. It shows that, generally speaking, as a student studies more, he makes a better grade, i.e., one moves along the curve. Now, I ask the students what would happen if they somehow came into possession of a copy of the exam. They respond, naturally, that they would probably be able to make a higher grade than before given the same amount of study time. In other words, the function shifts. Shifts in the Demand Curve • Change in Demand • A shift in the demand curve, either to the left or right. • Caused by any change that alters the quantity demanded at every price. © 2007 Thomson South-Western This product more people want to buy but not because the price went down. Look at the price Notice the price and Quantities stayed the same D Price 5 d2 d1 6 10 Quantity When the curve shifts it is called a Change in Demand. • There are certain things that will make the demand curve shift. These are called the determinants of demand. P r i c e D d1 Quantity P r i d2 c e D d1 d2 Quantity Shifts in the Demand Curve – Consumer income – Prices of related goods/complimentary and substitute goods. – Tastes – Expectations – Number of buyers Expectations • College students are often a poor down-trodden lot who must pinch pennies to get by and often subsist for most of their college careers on oatmeal or macaroni and cheese. They have to walk around in old rags. (Playing up the poverty of students gets sympathetic attention!) They endure this extreme deprivation until the last semester of their senior year. Then they start to apply for jobs and go to interviews. You can easily tell who is doing well in the job search process, they are the students who go out for pizza and beer and who begin to sport flashy new clothes! You can also distinguish between majors, accounting and computer science majors with high expectations will go out for pizza frequently, philosophy majors perhaps once or twice! Why does this occur? It is because good interviews give students confidence that in a few months their era of poverty will draw to a close. It is not necessary to even receive their first paycheck for these students to begin to alter their consumption patterns. Most have some slight reserve of cash, and the mere expectation of fat checks in a few months is enough to loose the bands on their coffers. Those without any nest egg may be inclined to borrow a bit, knowing that repayment will be easy. Budding accountants and systems analysts can, of course, be more prodigal since the size of the paycheck they anticipate is substantially fatter than that expected by the average philosophy major. Expectations of the future are a broad and powerful demand shifter not limited to expectations of future prices of a specific good. 6 shifts-Determinants of Demand you must memorize this!!! • CT=CONSUMER TASTE- What people THINK • CI-CONSUMER INCOME- How much money people have • SUBSTITUTE GOOD-SG- Good that is bought instead of another good-example COKE AND PEPSI • COMPLIMENTARY GOOD-CG- Goods that are bought together like PB AND JELLY • # BUYERS-#B-The number of potential customers. More people = more demand and vice versa • EXPECTATIONS-E-Anticipation of something happening. Figure 3 Shifts in the Demand Curve Price of Ice-Cream Cone Increase in demand Decrease in demand Demand curve, D2 Demand curve, D1 Demand curve, D3 0 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Market Demand versus Individual Demand • Market demand refers to the sum of all individual demands for a particular good or service. • Graphically, individual demand curves are summed horizontally to obtain the market demand curve. © 2007 Thomson South-Western The Market Demand Curve When the price is $2.00, When themarket price is $2.00, The demand curve is the Nicholas will demand 3 Catherine will demand 4 of thecones. individual demand ice-cream cones. curves! ice-cream Catherine’s Demand Price of IceCream Cone + Nicholas’s Demand Price of IceCream Cone 2.00 2.00 1.00 1.00 4 8 Quantity of Ice-Cream Cones The market demand at horizontal sum $2.00 will be 7 ice-cream = cones. Market Demand Price of IceCream Cone 2.00 1.00 3 5 Quantity of Ice-Cream Cones When the price is $1.00, When the price is $1.00, Catherine will demand 8 Nicholas will demand 5 ice-cream cones. ice-cream cones. 7 13 Quantity of Ice-Cream Cones The market demand at $1.00, will be 13 icecream cones. © 2007 Thomson South-Western Shifts in the Demand Curve • Consumer Income • As income increases the demand for a normal good will increase. • As income increases the demand for an inferior good will decrease. © 2007 Thomson South-Western Consumer Income Normal Good Price of IceCream Cone $3.00 An increase in income... 2.50 Increase in demand 2.00 1.50 1.00 0.50 D1 0 1 2 3 4 5 6 7 8 9 10 11 12 D2 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Consumer Income Inferior Good Price of IceCream Cone $3.00 2.50 An increase in income... 2.00 Decrease in demand 1.50 1.00 0.50 D2 0 1 D1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Shifts in the Demand Curve • Prices of Related Goods • When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes. • When a fall in the price of one good increases the demand for another good, the two goods are called complements. © 2007 Thomson South-Western Table 1 Variables That Influence Buyers © 2007 Thomson South-Western EXAMPLES-get a board and marker • COKE GOES OFF SALE!!!! • COKE-STOCK MARKET CRASHES!!!! CAUSING A GREAT DEPRESSION!!! • COKE- PEPSI GOES OFF SALE • COKE-CHIPS GO ON SALE • COKE-CHINA GOES BANKRUPT AND ALL THE PEOPLE IMMIGRATE TO THE UNITED STATES!!!!!!!! • COKE-EXPECT THE PRICE OF COKE TO GO DOWN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! • COKE-GOES ON SALE GRAPH COKE AND PEPSI DON’T Graph Coke is bad for you. Price D d2 D1 Quantity GRAPH COKE-PEPSI IS FOUND TO BE BAD FOR YOU D D2 D1 LOTS OF NEW PEOPLE IMMIGRATE TO UNITED STATES D D2 D1 PEPSI GOES ON SALE GRAPH COKE AND PEPSI P P QD D D1 D2 PEPSI Q COKE Q CHIPS RAISE THEIR PRICE GRAPH COKE AND CHIPS D1 D2 CHIPS COKE COKE CAUSES CANCER P D D1 D2 Q examples • Coke goes off sale • Coke- and pepsi go on sale graph both • Coke-Lebron James advertises for coke graph coke and Pepsi • Coke- Govt cuts consumer taxes Lets Move on to SUPPLY • Supply is always looked at from the manufacturer/seller/producer of a product. The curve looks like it goes up! Thus sUPply Price Quantity SUPPLY • Quantity supplied is the amount of a good that sellers are willing and able to sell. • Law of Supply – The law of supply states that, other things equal, the quantity supplied of a good rises when the price of the good rises. © 2007 Thomson South-Western The Supply Curve: The Relationship between Price and Quantity Supplied • Supply Schedule • The supply schedule is a table that shows the relationship between the price of the good and the quantity supplied. © 2007 Thomson South-Western Ben’s Supply Schedule © 2007 Thomson South-Western The Supply Curve: The Relationship between Price and Quantity Supplied • Supply Curve • The supply curve is the graph of the relationship between the price of a good and the quantity supplied. © 2007 Thomson South-Western Figure 5 Ben’s Supply Schedule and Supply Curve Price of Ice-Cream Cone $3.00 1. An increase in price ... 2.50 2.00 1.50 1.00 0.50 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones 2. ... increases quantity of cones supplied. © 2007 Thomson South-Western Market Supply versus Individual Supply • Market supply refers to the sum of all individual supplies for all sellers of a particular good or service. • Graphically, individual supply curves are summed horizontally to obtain the market supply curve. © 2007 Thomson South-Western Shifts in the Supply Curve • • • • Input prices Technology Expectations Number of sellers © 2007 Thomson South-Western 5 SUPPLY SHIFTS • PRODUCTION/TECHNOLOGY-PT-YOU HIRE BETTER EDUCATED WORKERS/OR MACHINES TO RUN IN THE FACTORY. • COST OF INPUTS-COI-COSTS OF PRODUCTION-WAGESGAS-. • EXPECTATIONS-IF THE COST OF ALUMINUM IS GOING TO RISE• GOVERNMENT-POLLUTION• # OF SELLERS-THIS IS WHERE YOU LOOK AT IT FROM A MACROECONOMIC STANDPOINT!!! © 2007 Thomson South-Western Shifts in the Supply Curve • Change in Quantity Supplied • Movement along the supply curve. • Caused by a change in anything that alters the quantity supplied at each price. © 2007 Thomson South-Western Change in Quantity Supplied Price of IceCream Cone S C $3.00 A rise in the price of ice cream cones results in a movement along the supply curve. A 1.00 0 1 5 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Shifts in the Supply Curve • Change in Supply • A shift in the supply curve, either to the left or right. • Caused by a change in a determinant other than price. © 2007 Thomson South-Western Figure 7 Shifts in the Supply Curve Price of Ice-Cream Cone Supply curve, S3 Decrease in supply Supply curve, S1 Supply curve, S2 7 Increase in supply 0 5 12 20 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Table 2: Variables That Influence Sellers © 2007 Thomson South-Western So Just like demand you have different scenarios Price Change or Shift in Supply P QS P S S1 S2 P QS Q P S Q S2 S1 Q SOFT DRINK INDUSTRY COKE GOES OUT OF BUSINESS S2 S1 S 6 8 15 AN EXAMPLE OF A Product going on sale from producers standpoint. P QS 1.00 .50 25 100 Q AN EXAMPLE OF A PRICE CHANGE FOR SUPPLY P QS 1.00 .50 25 100 Q • WE HIRE A BUNCH OF HIGH SCHOOL DROP OUTS. S2 S1 • GOVERNMENT TELLS COKE POLLUTE THE RIVER WE DON’T CARE. Why would they produce more? S1 S2 3 10 25 MORE EXAMPLES • ALUMINUM PRICES GO UP(GRAPH S2 COKE) S1 MORE EXAMPLES • MINIMUM WAGE GOES UP GRAPH COKE!( GRAPH TWO OF THEM!! • COKE LOWERS ITS PRICE GRAPH IT FROM A SUPPLIER AND CONSUMER STANDPOINT • Coke raises its price-graph both curves!!!!!please get it right!!! COKE LOWERS PRICE SHOW BOTH COKE-ROBOTS BREAK IN OUR FACTORY AND DESTROY STUFF COKE-GAS PRICES CONTINUE TO RISE COKE-GOVERENMENTMINIMUM WAGE IS NOW 8 DOLLARS s2 s1 COKE-COKE EXPECTS ALUMINUM PRICES TO GO UP s1 s2 GRAPH MINUTE MAID ORANGE JUICE-FREEZE KILLS TREES!!!! GRAPH OIL-THE PRICE OF OIL GOES UP!!!!!!!!!!!! QS Get Board and Markers and get started. I know you did it yesterday. It is good practice. • 1. Show 100 people wanting coke for 2 dollars. • 2. Show coke producing 200 cokes for 3 dollars. • 3. Show coke producing 300 cokes for 4 dollars and then the price going up to 5 dollars and them producing 600. • 4. Show 1000 people wanting ipods at 50 dollars and then their price going up to 299 and 200 people wanting them. • 5. Show 1000 people wanting ipods at 200 dollars and then they are found to cause cancer so only 100 people want them. Get Board and Markers and get started. • 6. Show what happens to the Demand for Apples if they are found to fight cancer. • 7. Show what happens to the Demand for Gasoline if a Hurricane is heading toward us. • 8. Show what happens to the Production of a Chemical Plant if the Govt cuts restriction on pollution. • 9. Show what happens to the Demand for Coach Days tutoring as the Test Approaches. • 10. Show what happens to the Supply of Dogs if the price of dogs goes up? Get Board and Markers and get started. • 11.Show what happens to the Demand for Dogs f the Price of Dog food quadruples? • 12. The Ipad is a huge success! Graph the consumers perspective. • 13. Show what happens to the Demand for Cars if the govt lowers the Legal driving Age. • 14. Show what happens to the Demand for Beer if the govt raises the legal drinking age. • 15. Show what happens to the demand of diapers if there is an influx of new immigrants. • 16. Show what happens to the demand for Flashlights if a hurricane is expected. • 17. Graph the demand for Coke and Pepsi if coke goes on Sale. • 18. Graph the supply of Coke and Pepsi if they both raise their prices. • 19. Graph the Demand for Coke and Pepsi if they both lower their prices. • 20. What is the Law of demand. • 21. Graph Orange Juice and Oranges. What happens to the production if insects destroy most of the crop? • 22. Graph Production of Tshirts if-cotton prices go up? • 23. Graph Production of Tables and Chairs if Wood becomes more expensive. • 24. Graph consumption of Tables and Chairs if tables go on sale. • 25. Graph consumption of Cliff notes towards the end of a semester? • 26. Graph Production and Consumption of coke if it goes on sale. • 27. Graph Demand for Guns if the president tries to restrict them? • 28. Graph the production of Guns if the price goes up? • 29. Graph consumption Tami-flu if the swine flu breaks out again. • • • • • 30 What is the Law of Supply? 31. When do you use QS 32. When do you use just S 33. When do you use QD 34. when do you use D • 35. List the 6 things the shift the demand curve. • 36. List the 5 things that shift the Supply curve. Practice » • Mexico • • • • • • • » Cars Trucks 1000 2000 USA 300 300 37.AAC 38.AAT 39.CAC 40.CAT 41.What does it cost Mexico to make 1 truck? 42.Who imports Cars? Practice » • Mexico • • • • • • • » Cars Trucks 50hr 200hr USA 50hr 500hr 43.AAC 44.AAT 45.CAC 46.CAT 47.What does it cost Mexico to make 1 truck? 48.Who imports Cars? • • • • 49. Graph Equilibrium 50. Graph a surplus. 51. Graph a shortage. 52. Graph Coke-Demand is 100 and supply is 50? • 53. Graph Coke-Demand is 100 and Supply is 200. 1. Opportunity Cost of going from B to C? 2. Most Baseballs that can be made? 3. What about point D? 4. What do we know about points A, B, C? 5. Opportunity Cost of going from A to C? 6. What about Point D? 7. What is opportunity cost of going from B to F? CAFÉ EQUILIBRIUM • SUEPLY AND DEMAN FINNALY MEET AT EQUILIBRIUM. HOW SWEET NOW EVERYONE IS HAPPY. • CONSUMERS HAVE ENOUGH PRODUCTS AND SUPPLIERS HAVE SOLD ALL THAT THEY HAVE MADE SUPPLY AND DEMAND TOGETHER • Equilibrium refers to a situation in which the price has reached the level where quantity supplied equals quantity demanded. © 2007 Thomson South-Western SUPPLY AND DEMAND TOGETHER • Equilibrium Price – The price that balances quantity supplied and quantity demanded. – On a graph, it is the price at which the supply and demand curves intersect. • Equilibrium Quantity – The quantity supplied and the quantity demanded at the equilibrium price. – On a graph it is the quantity at which the supply and demand curves intersect. © 2007 Thomson South-Western SUPPLY AND DEMAND TOGETHER Demand Schedule Supply Schedule At $2.00, the quantity demanded is equal to the quantity supplied! © 2007 Thomson South-Western Figure 8 The Equilibrium of Supply and Demand Price of Ice-Cream Cone Supply Equilibrium Equilibrium price $2.00 Equilibrium quantity 0 1 2 3 4 5 6 7 8 Demand 9 10 11 12 13 Quantity of Ice-Cream Cones © 2007 Thomson South-Western • Song link © 2007 Thomson South-Western • I work all night, I work all day, to pay the bills I have to pay Ain't it sad And still there never seems to be a single penny left for me That's too bad In my dreams I have a plan If I got me a wealthy man I wouldn't have to work at all, I'd fool around and have a ball... Money, money, money Must be funny In the rich man's world Money, money, money Always sunny In the rich man's world Aha-ahaaa All the things I could do If I had a little money It's a rich man's world A man like that is hard to find but I can't get him off my mind Ain't it sad And if he happens to be free I bet he wouldn't fancy me That's too bad So I must leave, I'll have to go To Las Vegas or Monaco And win a fortune in a game, my life will never be the same... Money, money, money Must be funny In the rich man's world Money, money, money Always sunny In the rich man's world Aha-ahaaa All the things I could do If I had a little money It's a rich man's world Money, money, money Must be funny In the rich man's world Money, money, money Always sunny In the rich man's world Aha-ahaaa All the things I could do If I had a little money It's a rich man's world It's a rich man's world © 2007 Thomson South-Western • Draw a supply and demand diagram that shows the boss receiving “the lions share bliss” while someone who scrubs floors gets much less. In other words, what factors would affect supply and demand such that CEO’s receive 300 times the compensation of average workers? Are CEO’s paid too much? © 2007 Thomson South-Western Equilibrium • Surplus • When price > equilibrium price, then quantity supplied > quantity demanded. • There is excess supply or a surplus. • Suppliers will lower the price to increase sales, thereby moving toward equilibrium. © 2007 Thomson South-Western Figure 9 Markets Not in Equilibrium (a) Excess Supply Price of Ice-Cream Cone Supply Surplus $2.50 2.00 Demand 0 4 Quantity demanded 7 10 Quantity supplied Quantity of Ice-Cream Cones © 2007 Thomson South-Western Equilibrium • Shortage • When price < equilibrium price, then quantity demanded > the quantity supplied. • There is excess demand or a shortage. • Suppliers will raise the price due to too many buyers chasing too few goods, thereby moving toward equilibrium. © 2007 Thomson South-Western Figure 9 Markets Not in Equilibrium (b) Excess Demand Price of Ice-Cream Cone Supply $2.00 1.50 Shortage Demand 0 4 Quantity supplied 7 10 Quantity of Quantity Ice-Cream demanded Cones © 2007 Thomson South-Western Equilibrium • Law of supply and demand • The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance. © 2007 Thomson South-Western Table 3: Three Steps for Analyzing Changes in Equilibrium © 2007 Thomson South-Western Figure 10 How an Increase in Demand Affects the Equilibrium Price of Ice-Cream Cone 1. Hot weather increases the demand for ice cream . . . Supply New equilibrium $2.50 2.00 2. . . . resulting in a higher price . . . Initial equilibrium D D 0 7 3. . . . and a higher quantity sold. 10 Quantity of Ice-Cream Cones © 2007 Thomson South-Western Three Steps to Analyzing Changes in Equilibrium • Shifts in Curves versus Movements along Curves • A shift in the supply curve is called a change in supply. • A movement along a fixed supply curve is called a change in quantity supplied. • A shift in the demand curve is called a change in demand. • A movement along a fixed demand curve is called a change in quantity demanded. © 2007 Thomson South-Western Figure 11 How a Decrease in Supply Affects the Equilibrium Price of Ice-Cream Cone S2 1. An increase in the price of sugar reduces the supply of ice cream. . . S1 New equilibrium $2.50 Initial equilibrium 2.00 2. . . . resulting in a higher price of ice cream . . . Demand 0 4 7 3. . . . and a lower quantity sold. Quantity of Ice-Cream Cones © 2007 Thomson South-Western Table 4: What Happens to Price and Quantity When Supply or Demand Shifts? © 2007 Thomson South-Western Summary • Economists use the model of supply and demand to analyze competitive markets. • In a competitive market, there are many buyers and sellers, each of whom has little or no influence on the market price. © 2007 Thomson South-Western Summary • The demand curve shows how the quantity of a good depends upon the price. – According to the law of demand, as the price of a good falls, the quantity demanded rises. Therefore, the demand curve slopes downward. – In addition to price, other determinants of how much consumers want to buy include income, the prices of complements and substitutes, tastes, expectations, and the number of buyers. – If one of these factors changes, the demand curve shifts. © 2007 Thomson South-Western Summary • The supply curve shows how the quantity of a good supplied depends upon the price. – According to the law of supply, as the price of a good rises, the quantity supplied rises. Therefore, the supply curve slopes upward. – In addition to price, other determinants of how much producers want to sell include input prices, technology, expectations, and the number of sellers. – If one of these factors changes, the supply curve shifts. © 2007 Thomson South-Western Summary • Market equilibrium is determined by the intersection of the supply and demand curves. • At the equilibrium price, the quantity demanded equals the quantity supplied. • The behavior of buyers and sellers naturally drives markets toward their equilibrium. © 2007 Thomson South-Western P THE GRAPH TO COPY S1 EP1 100 D1 EQ1 100 Q P LETS SPY ON THEM S1 EQUILIBRIUM EQUILIBRIUM PRICE 100 D1 EQUILIBRIUM QUANTITY 100 Q P HYBRID CARS IF OIL PRICES CONTINUE TO RISE!!! S1 EP1 100 D2 D1 EQ1 100 Q EP AND EQ WILL SUFFICE!!!!!!! S1 P EP1 D1 EQ1 Q LETS PRACTICE COKE CAUSES CANCER S1 P D EP1 EP2 D2 EQ2 EQ1 D1 Q P ALUMINUM PRICES GO UP GRAPH COKE S1 S2 EP2 EP D1 EQ2 EQ Q COKE RAISES ITS PRICE SURPLUS OF COKE P S1 1.50 How many Buyers? 50 EP1 1.00 IF COKE RAISES ITS PRICE THEY WILL MAKE MORE COKE BUT LESS PEOPLE WILL BE BUYING IT BECAUSE THE PRICE WENT UP How many made? 150 D1 50 EQ1 150 Q COKE LOWERS ITS PRICE S1 How many will be made? 50 P Therefore you have a shortage of coke! EP1 1.00 How many want to buy it?150 .50 D1 50 100 EQ 150 P ORANGES FREEZE GRAPH SUPPLY AND DEMAND!!!! s2 S1 ep2 EP1 100 D1 eq2 EQ1 100 Q Coke causes cancer p s 1.00 d 100 q Coke causes cancer p s D 1.00 ep2 d d2 eq2 100 q Gasoline- Hurricane Wipes out some of the Gasoline Refineries p s Ep 1.00 d eq 100 q GasolineHurricane Wipes out some of the Gasoline Refineries s2 p s ep2 Ep s 1.00 d eq2 eq 100 q Gas-China has a billion People and they are all starting to get cars p s Ep 1.00 d eq 100 q Gas-China has a billion People and they are all starting to get cars p s Ep D 1.00 d2 d1 eq 100 q Gas-China has a billion People and they are all starting to get cars. But they keep the price the same p s D 1.50 Ep 1.00 What should the price go too? 1.50 d2 100 is made IF price is still 1.00are how much is and 500 wanted and how much is made? needed eq 100 So there is a d1 shortage 500 q Supply and Demand Together Forever p surplus s 2.00 Ep 1.00 d 50w eq 100 150m q Astros T shirts if they are in the world series p s Ep D 20 d2 d1 eq 100 q Gasoline!!!! When a hurricane starts coming towards you!!!! p s 10 Ep D 2.80 d2 d1 eq 100 q 500 Gasoline!!!! When a hurricane starts coming towards you! But because of no price gouging law prices must p stay the same what will happen? s 10 Ep D 2.80 d2 d1 eq 100 500 q Supply and Demand Together Forever p s Ep 1.00 d eq 100 q DIAMONDS • WHAT IF I TOLD YOU THAT THERE ARE JUST AS MANY DIAMONDS IN THE WORLD AS EMERALDS. How could you explain why diamonds are more expensive. Graph it!!!! AP Packet Questions • LOD-21B,33B,25C • SD-5,17,20,33,34,45,47,50, 12A,2B,48B,20A,5B,41C • INFERIOR NORMAL GOOD21A,4B,4C,,40C • SD BOTH MOVE4A,32A,3B,28C 10 E-B, C P S1 S2 PEACHES NEW TECHNOLOGY EP1 100 D1 EQ1 100 Q NECTARINES P S1 EP1 100 D2 EQ1 100 D1 Q MORE EXAMPLES ORANGES-WE HIRE A BUNCH OFP LAZY WORKERS SHOW EPS S1 AND EQS EP1 100 D1 EQ1 100 Q ORANGE GROWERS GET REALLY MAD AND FEEL UNDERAPPRECIATED AND DECIDE TO RAISE THEIR P PRICES S1 150 EP1 100 D1 50 EQ1 100 150 Q AFTER A REVOLT AT HEB THE ORANGE GROWERS DECIDE THEIR PRICES ARE TO HIGH AND DECIDE TO LOWER THEM P S1 EP1 100 D1 50 EQ1 100 150 Q ORANGES-APPLES GO ON SALE GRAPH ORANGES P S1 EP1 100 D1 EQ1 100 Q ORANGES-APPLES GO ON SALE BUT THEY DON’T CHANGE THE P PRICE S1 EP1 100 D2 50 EQ1 100 D1 Q ORANGES-WE GET BETTER EQUIPMENT TO PICK ORANGES P WITH S1 EP1 100 D1 EQ1 100 Q THE GRAPH TO COPY P S1 EP1 100 D1 EQ1 100 Q AP Packet Questions • LOD-21B,33B,25C • SD-5,17,20,33,34,45,47,50, 12A,2B,48B,20A,5B,41C • INFERIOR NORMAL GOOD21A,4B,4C,,40C • SD BOTH MOVE4A,32A,3B,28C