Download Supply and Demand - Plain Local Schools

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Law of Demand: economic rule which states that
the quantity demanded, and price move in
opposite directions
As price goes
, quantity demanded goes
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As price goes
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, quantity demanded goes
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Law of Supply: Economic rule which states
that an increase in supply leads to a decrease
in price while a decrease in supply leads to an
increase in price.
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Rule stating that the additional satisfaction a
consumer gets from purchasing one or more
units of a product will be less with each one
purchased
Ex: $ 15.00 for a CD, if you have money for one
you will buy a least one. Buying additional CD’s
depends on the satisfaction you expect from
buying other CD’s. You will have high satisfaction
from owning more CD’s.
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Rule stating that individuals cannot keep buying
the same quantity of a product if its price rises
and their income stays the same
Ex: Groceries, Gasoline
Also works in reverse
If price decreases and income remains the same,
purchasing power is increased, consumer will
likely buy more of the product
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The economic principle stating that if two items
satisfy the same need and the price of one rises,
people will buy the other
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Ex: CD’s and iTunes Albums
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What is a demand curve?
A line plotted on a graph showing the quantity
demanded of a good or service at each possible
price
Draw example from board on your notes
Pay special attention to where price and quantity
are located on the graph
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What is a supply curve?
A line plotted on a graph that shows the
quantities supplied of a good or service at each
possible price
Draw example from the board on your notes
Pay special attention to where the price and
quantity are located on the graph
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Shortage- Quantity demanded is greater than
the quantity supplied
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Examples- Wii and Xbox were introduced
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Surplus- When supply is greater than demand
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Examples- As seen on TV products
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Price of a product or service at which the
amount producers are willing to supply is equal
to the amount consumers are willing to buy
On a graph it is where the supply and demand
curves intersect
Copy down graph from the board. Pay attention
to where price and quantity are located. Circle
where the two intersect
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Complimentary goods- raw goods that are
related in an inverse fashion to other goods
Examples- Gas/Oil, Peanut Butter/Jelly
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Substitute goods- Goods that are in
competition.
Examples- Butter/Margarine
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Both types of goods are in a direct relationship.
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