SUPPLY & SUPPLY & DEMANDDEMAND4.1 - 4.2 & 5.1 - 5.24.1 - 4.2 & 5.1 - 5.2

DemandDemand The ____________ of any good is the The ____________ of any good is the

amount of the good that buyers are amount of the good that buyers are willing and able to purchase at a certain willing and able to purchase at a certain price.price.

____________ is the want for a product or ____________ is the want for a product or service. service.

____________: the claim that the quantity ____________: the claim that the quantity demanded of a good falls when the price demanded of a good falls when the price of the good rises, other things equal of the good rises, other things equal

Demand is from the ___________ Demand is from the ___________ perspective!perspective!

quantity demandedquantity demanded

DEMANDDEMAND

Law of demandLaw of demand

BUYERSBUYERS

LAW OF _____________ in LAW OF _____________ in simpler words….simpler words….

When something is cheaper, people When something is cheaper, people buy ___________ of it.buy ___________ of it.

When something is more expensive, When something is more expensive, people buy ___________ of it.people buy ___________ of it.

DEMAND

MORE

LESS

EXAMPLES

•When BIG MACS are TWO for TWO…people tend to purchase more BIG MACS when they visit McDonalds

•When the PS3 came down in price from $799 to $299, they sold more

The Law of Demand in The Law of Demand in PICTUREPICTURE form form

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(P) Price of Lattes

(Q)Quantity of Lattes

Zakk’s Demand Schedule Zakk’s Demand Schedule & Curve& Curve PricPric

e e of of

lattelattess

QuantitQuantity y

of lattes of lattes demanddemand

eded

$0.0$0.000

1616

1.001.00 1414

2.002.00 1212

3.003.00 1010

4.004.00 88

5.005.00 66

6.006.00 44Schedule

Curve

D

!!! REMEMBER !!!!!! REMEMBER !!!

A demand curve or schedule A demand curve or schedule graphically define the graphically define the LAW OF LAW OF DEMANDDEMAND

A demand curve line A demand curve line SWOOPS SWOOPS DOWN TO THE GROUNDDOWN TO THE GROUND like a like a crashing planecrashing plane

A demand graph ONLY shows us A demand graph ONLY shows us how how PRICEPRICE affects our demand for affects our demand for products and services!!!products and services!!!

CLASS DISCUSION #1CLASS DISCUSION #1

When you purchase something, what When you purchase something, what are are THREETHREE things you consider things you consider before you purchase it OTHER before you purchase it OTHER THAN PRICE?THAN PRICE?

EXAMPLESColor

QualityIs it comfortable or do I look good in this

Is it popularBrand Name

Value (do I get a lot for the money)How much use am I going to get out of it

Taste

Demand Curve ShiftersDemand Curve Shifters The demand curve shows how price The demand curve shows how price

affects quantity demanded, affects quantity demanded, other other things being equalthings being equal. .

These “other things” are non-price These “other things” are non-price determinants of demand (determinants of demand (i.e.,i.e., things things that determine buyers’ demand for a that determine buyers’ demand for a good, other than the good’s price). good, other than the good’s price).

Changes in them shift the Changes in them shift the DD curve… curve… Things that have Things that have POSITIVEPOSITIVE affects on affects on

Demand will shift the line Demand will shift the line RIGHTRIGHT Things that have Things that have NEGATIVENEGATIVE affects affects

on Demand will shift the line on Demand will shift the line LEFT LEFT

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P

Q

Suppose the number of buyers increases. Then, at each P, Qd will increase (by 5 in this example).

Example of Demand Curve Example of Demand Curve Shift:Shift:

D2

Things that affect (shift) Things that affect (shift) DEMAND DEMAND otherother than price than price

levelslevels# of buyers# of buyersChange in people’s incomeChange in people’s incomePrices of related goods Prices of related goods (ie (ie

peanut butter and jelly)peanut butter and jelly)

Fads or PopularityFads or PopularityFuture ExpectationsFuture Expectations

CLASS DISCUSSION #2CLASS DISCUSSION #2 Which way will DEMAND shift for PIZZA Which way will DEMAND shift for PIZZA

if 10,000 more people move to Shelby if 10,000 more people move to Shelby Township?Township?

Which way will DEMAND shift for Which way will DEMAND shift for ABERCROMBIE clothes if people find out ABERCROMBIE clothes if people find out they give you body rashes?they give you body rashes?

Which way will DEMAND shift for Which way will DEMAND shift for MUSTARD if it is proven to cure MUSTARD if it is proven to cure CANCER?CANCER?

Which way will DEMAND shift for BIG Which way will DEMAND shift for BIG MACS if they come down in price?MACS if they come down in price?

!!! REMEMBER!!! DEMAND DOES NOT SHIFT IF THERE IS A CHANGE IN PRICE, RATHER,

A CHANGE IN PRICE MOVES YOU ALONG THE CURVE…ONLY NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!

SupplySupply The ____________ of any good is the amount The ____________ of any good is the amount

that sellers are willing and able to sell at a that sellers are willing and able to sell at a certain price. certain price.

____________ is the amount of a product or ____________ is the amount of a product or service. service.

____________: the claim that the quantity ____________: the claim that the quantity supplied of a good rises when the price of supplied of a good rises when the price of the good rises, other things equal the good rises, other things equal

Supply should be studied from the _________Supply should be studied from the _________

perspective!perspective!

quantity suppliedquantity supplied

SUPPLYSUPPLY

Law of SupplyLaw of Supply

SELLERSSELLERS

LAW OF _____________ in LAW OF _____________ in simpler words….simpler words….

When something is cheaper, When something is cheaper, STORES put ___________ of it on the STORES put ___________ of it on the shelves.shelves.

When something is more expensive, When something is more expensive, STORES put ___________ of it on the STORES put ___________ of it on the shelves.shelves.

SUPPLY

LESS

MOREEXAMPLES

•If prices are going up for sunglasses because the demand is increasing in the summer…stores supply more of them.

•On Black Friday there will be a small supply of cheaply priced Computers however after the Holidays there will be a large supply.

The Law of Supply in The Law of Supply in PICTUREPICTURE formform

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Starbucks’ Supply Schedule Starbucks’ Supply Schedule & Curve& Curve

PricPrice e of of

lattelattess

QuantitQuantity y of of

lattes lattes suppliesupplie

dd

$0.0$0.000

00

1.001.00 33

2.002.00 66

3.003.00 99

4.004.00 1212

5.005.00 1515

6.006.00 1818

P

Q

Schedule

Curve

S

!!! REMEMBER !!!!!! REMEMBER !!!

A supply curve or schedule graphically A supply curve or schedule graphically define the define the LAW OF SUPPLYLAW OF SUPPLY

A supply curve line A supply curve line SWOOPS UP TO SWOOPS UP TO THE SKYTHE SKY like an airplane taking off like an airplane taking off

A supply graph ONLY shows us how A supply graph ONLY shows us how PRICEPRICE affects the supply of products affects the supply of products and services…however…there are and services…however…there are other determinantsother determinants

CLASS DISCUSION #3CLASS DISCUSION #3

If you are a store owner, what are If you are a store owner, what are THREETHREE things you consider before things you consider before you order goods to put on the shelf you order goods to put on the shelf OTHER THAN PRICE?OTHER THAN PRICE?

EXAMPLESColor that is in

QualityIs it popular or a fad right now

Brand Name popularityValue (Are people going to get a lot for their money)

How much people need or want it

Supply Curve ShiftersSupply Curve Shifters The demand curve shows how price The demand curve shows how price

affects quantity supplied, affects quantity supplied, other things other things being equalbeing equal. .

These “other things” are non-price These “other things” are non-price determinants of supply (determinants of supply (i.e.,i.e., things things that determine sellers’ supply of a that determine sellers’ supply of a good, other than the good’s price). good, other than the good’s price).

Changes in them shift the Changes in them shift the SS curve… curve… Things that have Things that have POSITIVEPOSITIVE affects on affects on

Supply will shift the line Supply will shift the line RIGHTRIGHT Things that have Things that have NEGATIVENEGATIVE affects affects

on Supply will shift the line on Supply will shift the line LEFT LEFT

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P

Q

Suppose the price of milk falls. At each price, the quantity of Lattes supplied will increase (by 5 in this example).

Example of Supply Curve Example of Supply Curve Shift:Shift:

S2

Things that affect (shift) Things that affect (shift) SUPPLYSUPPLYotherother than price than price

levelslevels# of sellers# of sellersChange in people’s incomeChange in people’s incomePrices of related goods Prices of related goods (ie peanut (ie peanut

butter and jelly)butter and jelly)

Fads or PopularityFads or Popularity Input pricesInput pricesTechnology increasesTechnology increases

CLASS DISCUSSION #4CLASS DISCUSSION #4 Which way will SUPPLY shift for PIZZA if Which way will SUPPLY shift for PIZZA if

40 more pizza shops open up in Shelby 40 more pizza shops open up in Shelby Township?Township?

Which way will SUPPLY shift for Which way will SUPPLY shift for ABERCROMBIE clothes if they are ABERCROMBIE clothes if they are popular right now?popular right now?

Which way will SUPPLY shift for Which way will SUPPLY shift for MUSTARD if it is proven to give you MUSTARD if it is proven to give you CANCER?CANCER?

Which way will SUPPLY shift for BIG Which way will SUPPLY shift for BIG MACS if they come down in price?MACS if they come down in price?

!!! REMEMBER!!! SUPPLY DOES NOT SHIFT IF THERE IS A CHANGE IN PRICE, RATHER,

A CHANGE IN PRICE MOVES YOU ALONG THE CURVE…ONLY NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!