DD11 DD22

PP

QDQD11 QDQD22

DD11 DD22

PP

QDQD11 QDQD22

More incomeMore incomeresults inresults in

more demandmore demandfor new cars;for new cars;

New CarsNew Cars

Less incomeLess incomeresults inresults in

less demandless demandfor new cars.for new cars.

DD11 DD22

PP

QDQD11 QDQD22

More demand More demand for both newfor both newand used carsand used cars

New CarsNew Cars

Used CarsUsed Cars

This is what we told 1 billion 1 billion ChineseChinese, as new potential new potential consumersconsumers, when we opened

trade relationstrade relations with them in the 70s.

DD11 DD22

PP

QDQD11 QDQD22

Let’s say that we are coming out of recessioncoming out of recession & consumersfeel secure about their jobs. [Positive future incomePositive future income]

DD11

DD22

PP

QDQD11QDQD22

Let’s say that we are going into a recessiongoing into a recession and consumersdon’t feel secure about their jobs. [NegativeNegative future income future income]

ComplementComplementSubstituteSubstitute

MilkMilk CerealCereal Pop TartsPop Tarts

DD11 DD22

PPPP11

QDQD11

P2

DD11

DD22

DD

PP

QDQD22

1.1.ResourceResource CostsCosts

[wages & raw materials[wages & raw materials]]

WagesWagesRaw MaterialsRaw Materials

SSIf resource costs

Decrease, supply

Increases[making more $]

If resource costs

Increase, supply

Decreases[making less $]

SSSS

PP

P1

QS1QS1

BroccoliBroccoli““Substitutes in production”Substitutes in production”

Whoa, the price of Whoa, the price of Broccoli went up! Got to Broccoli went up! Got to plant more of that now!plant more of that now!

SCornCorn SS11

PP

SS22

Producers want to produce more of the good Producers want to produce more of the good that they can charge a higher price for.that they can charge a higher price for.

P2

QS2QS2

SS

Because cows produce moremilk, farmersdon’t have to have as manycows. [saves $]

SS

PP

We love these cow waterbeds We love these cow waterbeds because webecause we get get better better blood flowblood flow and can and can produce 30% more milkproduce 30% more milk..

Supply curvemoves “udderly”“udderly”to the right.

Less skin abrasionsso happier cowsproduce more milk.

NFLNFL

S1PP

Q

$50$50

SupplySupply of of FB games increased when the AFL was FB games increased when the AFL was formed. formed.

SS22

QSQS QSQS

AFL AFL in 2001in 2001(Arena Football League)(Arena Football League)

A new league is created so A new league is created so there are more games!there are more games!

Supply of FB games each week

8 new teams8 new teams

If oil producers expectexpect future oilfuture oil prices toprices to declinedecline, they will (increase/decrease) current production.

SS11

Oil PricesOil Prices

expectedexpected to decreaseto decrease

PP

SS22

If oil producers expect future oil prices to expect future oil prices to increaseincrease, they will (increase/decrease) current production.

SS22

Oil PricesOil Prices

expected expected to increaseto increase