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Name:______________________________________Date:_____________________Period:_________
Unit 2 SUPPLY AND DEMAND: HOW MARKETS WORK
• A ___________________ is a group of buyers and sellers of a particular good or service.
• Buyers determine ___________________.
• Seller’s determine___________________.
• Quantity demanded: the amount of a good that buyers are _____________________________to purchase.
• Law of Demand• The quantity demanded of a good__________ when the price of the good ___________.
Ben’s Demand Curve
• Change in Quantity Demanded
• Movement ____________ the demand curve.
• Caused by a ______________________________________________ of the product.
Change in Demand• Any change that alters the quantity demanded ______________________________.• A shift in the demand curve, either to the__________ or ___________.
Demand Shifters:
T-
I-
R-
E-
S-
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Name:______________________________________Date:_____________________Period:_________
Tastes & Preferences of Consumers• As people’s tastes ____________ in favor of a good, or an effective advertising campaign has
been waged, demand _________________ (shifts to the right).• As people’s tastes change ________________ a good, or a good loses popularity, demand
decreases (________ to the left).
Income of Consumers• As income_____________, consumer demand for goods and services _______________ (shifts
to the right).• As income_______________, consumer demand for goods and services ______________ (shifts
to the left).
Related Goods: SubstitutesSubstitute goods can be ______________________in place of one another.
• If two goods are __________________, when the price of Good A increases, demand for Good B increases (shifts to the __________).
• If ________goods are SUBSTITUTES, when the price of Good A _________________, demand for Good B decreases (shifts to the left).
Related Goods: ComplementsComplementary goods are used ________each other.
• If two goods are _______________________, when the price of Good A increases, demand for Good B decreases (shifts to the__________).
• If two goods are COMPLEMENTS, when the __________ of Good A decreases, demand for Good B increases (___________ to the right).
Substitute OR Complementary?• Cars and Tires-• Corn and Beans-• DVD Players and DVD’s-• Natural Gas and Electricity-
• Cereal and Milk-• Toast and Jam-• Sweatshirts and Sweaters-
Expectations of Future Price Changes• If ________________ expect the price of a good to _________in the future, immediate demand
increases (shifts to the right). • If consumers expect the price of a good to _________________ in the future, immediate
demand decreases (shifts to the __________).
Size of Population/Market• As the ______________ of consumers in a given market increases, ______________increases
(shifts to the right).• As the number of ____________________ in a given market decreases, demand decreases
(shifts to the left).
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Name:______________________________________Date:_____________________Period:_________
Elasticity of Demand
Measurement of consumers’ _____________________________ to price.
ELASTIC:Buyers are __________________________ to price changes.
INELASTIC:Buyers are _______ responsive to ______________changes.
Determinants of Demand Elasticity:• _______________________of substitutes• Price relative to___________________• Necessities ______ Luxuries• Time _______________ to adjust to a____________ change
Elastic or Inelastic?• Sugar-• New furniture-• New car-
• Gasoline-• Food-• Encyclopedia-
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Name:______________________________________Date:_____________________Period:_________
• 2% Milk-• Sailboat-• Socks-• Aspirin-
• Diet Coke-• Gold Jewelry-• Insulin-
Quantity supplied is the amount of a _____________________________________ are willing and able to sell.
Law of SupplyThe quantity supplied of a good________ when the price of the good_________.
Jerry’s Supply Curve
• Change in Quantity Supplied
• ________________________along the supply curve.
• Caused by a _________________________________________________ of the product.
Changes in Supply Any change that alters the quantity supplied _______________________. A _____________ in the ______________ curve, either to the left or right.
Supply Shifters:
T-
I-
G-
E-
R-
S-
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Name:______________________________________Date:_____________________Period:_________
Technological Advancements As technology advances, ____________________becomes more efficient and supply increases
(shifts to the right).International Events/Disasters
When international ___________ (such as wars & revolutions) or natural disasters occur, supply decreases (shifts to the __________).
Government Intervention(Taxes, Fees, Regulations, Subsidies)
When a ______, ________, or regulation is imposed on the production of a good or service, ________________ decreases (shifts to the left).
When a _______________ is granted for producers of a good or service, supply increases (shifts to the right).
Expectations of Future Price Changes If producers expect the price of a good to rise in the_____________, immediate supply
decreases (shifts to the left). If ________________ expect the price of a good to ___________________ in the future,
immediate supply increases (shifts to the right).
Resource Costs As the _____________________________________ (land, labor, and capital) become more
expensive for the producer to purchase, supply decreases (shifts to the left). As the factors of production (land, labor, and capital) become ________ expensive for the
producer to purchase, supply increases (shifts to the right).
Number of Sellers in the Market When additional firms (______________________) enter a market, supply of the product
increases (shifts to the right). When firms (businesses) _________ a market (go out of business or for some other reason
cease production),_____________ of the product decreases (shifts to the left).
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Name:______________________________________Date:_____________________Period:_________
Elasticity of SupplyMeasurement of
producers’ ______________________ to price.
ELASTIC:Producers are ___________________ to price changes.
INELASTIC:Producers are________ responsive to price changes.
Determinants of Supply Elasticity: Availability of _____________ ___________________ of inputs Storage ____________________ __________ needed to adjust to a ____________ change
Elastic or Inelastic? Bananas- Yogurt- Antiques- Medical Care-
Putting it all together: EQUILIBRIUM
Equilibrium
_________=_________
Law of Supply and Demand:
The price of any good adjusts to bring the ___________________________________and the _____________________________________ for that good into balance.
If Demand Increases… P Q
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Name:______________________________________Date:_____________________Period:_________
If Demand Decreases… P Q
If Supply Increases… P Q
If Supply Decreases… P Q
Four Steps to Analyzing Changes in Equilibrium
Does the event shift the supply (__________) or demand curve (________)?
Will the curve shift right ( ) or left ( )?
Draw & label the new curve on your graph
Locate the new equilibrium
(_________________________)
Airline Tickets Activity
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$ QD QS
200 24 1
300 16 10
400 10 16
500 4 22
600 0 25
Name:______________________________________Date:_____________________Period:_________
Nation’s largest spaghetti producer cuts pasta prices
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Name:______________________________________Date:_____________________Period:_________
Subzero temperatures destroy much of Florida’s citrus crop
Farmer invents new picking machine – Harvests apples in half the time
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Name:______________________________________Date:_____________________Period:_________
Colorado ski resorts announce 50% increase in lift ticket prices
Price Control
PRICE CEILING:(Creates a Shortage)
• A ________________ price set by the government that consumers are required to pay for a good or service.
• Prevents prices from getting too _______, enabling consumers to______ essential goods or services they wouldn’t be able to ____________ at the equilibrium price.
• Example: ___________________
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Name:______________________________________Date:_____________________Period:_________
PRICE FLOOR:(Creates a Surplus)
• A ________________ price set by the government that consumers are required to pay for a good or service.
• ____________ price up, ensuring that producers _______________ a benefit for providing a good or service
• Example: ___________________________
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