+ supply & demand. + ceteris paribus latin phrase that means “all other things remain the...

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Supply & Demand

+Ceteris paribus

Latin phrase that means “all other things remain the same”

What causes supply and demand to change?

+Finding equilibrium

+Determinants of demand Cause a change in demand

Will affect the equilibrium price and/or equilibrium quantity

+1. Change in consumers’ income Examples?

+2. Change in consumers’ preferences Examples?

+3. Change in the prices of related goods/services

Complements: things that go together—hot dogs and buns, cars and gasoline

Substitutes: Coke versus Pepsi, Pizza Hut versus Dominos, Wendy’s versus McDonalds

+4. Change in the number of consumers in a market Examples?

+5. Change in expectation of buyers Examples?

+Market survey: Demand for shoesPrice Before After$100 0 5$90 5 10$80 10 15$70 15 20$60 20 30

Graph the two demand curves from the data below:

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+Determinants of demand Cause a change in demand Change in demand results from a change in…

1. Consumers’ incomes2. Consumers’ preferences 3. Prices of related goods or services (complements or

substitutes) 4. Number of consumers in a market 5. Expectations of buyers

Will affect the equilibrium price and/or equilibrium quantity

+Determinants of supply Cause a change in supply Change in supply results from a change in…

1. Price of resources used to make good/service2. Technology used to make the good/service3. Number of sellers in the market4. Expectations of producers 5. Natural disasters & international events6. Government actions

Will affect the equilibrium price and/or equilibrium quantity

+1. Change in price of resources Examples?

+

Examples?

2. Change in technology

+3. Change in number of sellers Examples?

+4. Expectations of producers Examples?

+5. Natural disasters & other events

+6. Government actions • Subsidy • Excise Tax

+Market survey: Supply of babysitters

Price Before After$20 30 11$15 20 9$12 15 7$8 10 5$5 5 2

Graph the two demand curves from the data below:

+

+Determinants of supply Cause a change in supply Change in supply results from a change in…

1. Price of resources used to make good/service2. Technology used to make the good/service3. Number of sellers in the market4. Expectations of producers 5. Natural disasters & international events6. Government actions

Will affect the equilibrium price and/or equilibrium quantity