Download Supply and Demand 2013

Economics Review
Economic Systems
Types of Economic Systems

Traditional – people produce & distribute
goods according to custom
 Tribes

Command – the government makes all
economic decisions
 China,

in Africa
North Korea
Market – individual choice & voluntary
exchange direct decisions
 U.S.
Supply and Demand
Economic definitions for
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
Factors that cause demand to
change or shift
 Tastes
and fads
 Income
 Number of buyers
 Future price expectations
 Price and availability of:
Substitutes
compliments
 Inelastic
Demand: Price still moves
up and down but Demand stays the
same
Economic definition for
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
Factors that cause a change in
supply:
 Price
of land, labor or capital
 Technology
 Number of other sellers
 Price of other goods I could
produce
 Tax policy
 Equilibrium
Point: the point at which
the quantity & the price are equal
Surplus & Shortage

Surplus – Quantity
supplied is greater
then quantity
demanded

Supplied 10 ice
cream cones but
could only sell 4
You have a surplus of
6 cones!

Surplus & Shortage

Shortage – Quantity
demanded is greater
then quantity
supplied

Supplied 4 ice cream
cones but you had 10
customers
You were short 6
cones!

IRDL
When Supply & Demand shift:
 Increase in Supply/Demand = shift
Right
 Decrease in Supply/Demand = shift
Left
 Increase Right Decrease Left
Shift in Supply Lines
Shifts in Demand Lines
Business Cycle
Business Cycle
 Series
of expanding and contracting
economic activity.

Stages:
 Expansion
 Peak
 Contraction
 Trough
Business Cycle Stages
*Gross Domestic Product – all goods &
services produced by a nation w/in a
certain time
 Expansion – increase in the GDP; jobs
increase, higher demand & prices
 Peak – where GDP reaches its highest
point
Business Cycle Stages

Contraction– GDP declines; producers cut
back, resources become less scarce,
prices stabilize, & unemployment rises
– a contraction that lasts for six
months or more
 Depression – extended period of high
unemployment & lower business activity
 Recession

Trough – point when GDP & employment
stop declining