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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 Today’s Warm Up Answer in your notes & be ready to share: Imagine the equilibrium price for a can of tuna is $2.00. Bumblebee Tuna sets their price at $3.00 a can. Will this result in a shortage or surplus of tuna? How do you know? Be sure to graphically represent your answer. 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 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) Activity 1: Think, Pair, Coach Person A – complete side A Explain your answer to Person B Person B will say “Yes, that’s correct! Great job!”… Or, they will explain what you did wrong Person B – Complete side B Explain your answer to Person A Person A will say “Yes, that’s correct! Great job!”… Or, they will explain what you did wrong Alternate until all questions have been completed. Factors that cause a change in supply: Price of land, labor or capital (factors of production) Technology Number of other sellers Price of other goods I could produce Tax policy Activity 2: Think, Pair, Coach Person A – complete side A Explain your answer to Person B Person B will say “Yes, that’s correct! Great job!”… Or, they will explain what you did wrong Person B – Complete side B Explain your answer to Person A Person A will say “Yes, that’s correct! Great job!”… Or, they will explain what you did wrong Alternate until all questions have been completed. IRDL the Turtle “IRDL” will help you! INCREASE = RIGHT DECREASE = LEFT