warmup how would you describe supply and demand? how would you describe supply and demand?
TRANSCRIPT
![Page 1: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/1.jpg)
WarmUp
How would you describe supply and demand?
![Page 2: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/2.jpg)
Unit II: How Markets Work
Part I – Supply and Demand
![Page 3: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/3.jpg)
Demand
The desire, willingness and ability to buy a good or service
![Page 4: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/4.jpg)
Affective Demand
Must want to buyMust be willing to buyMust have the resources to buy
![Page 5: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/5.jpg)
What is market demand?
The total amount of demand created by all consumers for a product
![Page 6: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/6.jpg)
Demand Schedule
A table that lists the various quantities of a product that will be bought at different prices
![Page 7: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/7.jpg)
$50
$40
$30
$20
$10
$5
![Page 8: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/8.jpg)
Demand Curve
A graph that shows the amount of a product that will be bought at all possible prices
![Page 9: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/9.jpg)
![Page 10: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/10.jpg)
Direction of the Demand Curve
Downward Slope
![Page 11: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/11.jpg)
What does the law of demand state?
As price goes UP demand goes DOWN and visa versa
![Page 12: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/12.jpg)
What does utility refer to?
Satisfaction
![Page 13: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/13.jpg)
Diminishing Marginal Utility
Principle that additional satisfaction goes down as we consume more of a product
![Page 14: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/14.jpg)
Determinants of Demandchanges in:
Buyers (#of) – changes in population
Income – people earn more they spend more
Tastes – change in popularity or fads
Expectations – feelings of the future
Related goods Substitutes – goods that can replace others Compliments – goods that go along with another
![Page 15: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/15.jpg)
Decrease in demand at every price will produce a Left shift in demand
curve
![Page 16: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/16.jpg)
An increase in demand at every price will produce a right shift in
demand curve
![Page 17: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/17.jpg)
Demand Elasticity
How much demand for a product is affected by a change in price
![Page 18: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/18.jpg)
![Page 19: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/19.jpg)
![Page 20: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/20.jpg)
![Page 21: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/21.jpg)
Factors affecting elasticity
Percentage of IncomeAvailability of substitutesNecessity or LuxuryLength of time
![Page 22: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/22.jpg)
![Page 23: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/23.jpg)
![Page 24: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/24.jpg)
![Page 25: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/25.jpg)
Warmup
What is the law of demand?
![Page 26: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/26.jpg)
What is supply?
The various amounts of a good or service that producers will supply at different prices
![Page 27: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/27.jpg)
The Law of Supply
Suppliers will generally offer more for sale at higher prices and less at lower prices.
![Page 28: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/28.jpg)
What does a Supply Schedule illustrate?
How much will be supplied at different prices
![Page 29: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/29.jpg)
Supply Schedule for Video Games
Price Per Video Game Quantity Supplied
$50 200
$40 190
$30 170
$20 130
$10 100
$05 10
![Page 30: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/30.jpg)
What does a supply curve illustrate?
The amount of a good or service that will be supplied at different prices
![Page 31: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/31.jpg)
![Page 32: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/32.jpg)
In what direction does the supply curve slope reading from left to
right?
Upward
![Page 33: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/33.jpg)
What can cause a shift in supply at every price?
![Page 34: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/34.jpg)
The Cost of Resources
The materials used to produce
![Page 35: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/35.jpg)
Productivity
How efficient the work force is
![Page 36: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/36.jpg)
Technology
The methods used to make goods and services
Then…. …..and Now
![Page 37: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/37.jpg)
Government Policies
Gov regulations increase costs of production
![Page 38: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/38.jpg)
Taxes
Higher taxes = higher costsLower taxes = lower costs
![Page 39: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/39.jpg)
Subsidies
Government payment to help do something (decreases costs)
![Page 40: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/40.jpg)
Expectations
What owners believe demand will be
![Page 41: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/41.jpg)
Number of Suppliers
More suppliers = more supplyLess suppliers = less supply
![Page 42: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/42.jpg)
Shift in Supply
Price of Video Games
Original Q Supplied
Change in Q Supplied
$50 200 300
$40 190 290
$30 170 270
$20 130 230
$10 100 200
$05 10 110
![Page 43: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/43.jpg)
![Page 44: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/44.jpg)
When market supply increases at every price the supply curve shifts
to the
Right
![Page 45: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/45.jpg)
Now suppose the government increases taxes on the industry.
It will decreaseLabel this on the graph assuming that 100
less will supplied label it S3
![Page 46: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/46.jpg)
What does supply elasticity mean?
How much supply is affected by a change in price
Elastic Supply – quantity changes a great deal when price changes
Inelastic Supply – quantity changes little when price changes
![Page 47: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/47.jpg)
What affects the elasticity of supply?
How quickly a company can change how much it produces
![Page 48: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/48.jpg)
![Page 49: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/49.jpg)
Equilibrium Price
The price at which the amount demanded is equal to the amount supplied
Pe
Qe
![Page 50: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/50.jpg)
What is the equilibrium price of video games in our market?
$25
![Page 51: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/51.jpg)
What is a surplus?
When there is more supply than demand
![Page 52: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/52.jpg)
What is a shortage?
When there is greater demand than supply
![Page 53: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/53.jpg)
If price was set at $40 in our video game market what would exist?
Surplus
![Page 54: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/54.jpg)
What about $10?
Shortage
![Page 55: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/55.jpg)
What impact will a shortage have on price?
Prices will go up
![Page 56: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/56.jpg)
Surplus?
Prices go down
![Page 57: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/57.jpg)
What are price controls?
When the government sets the price of goods and services because they feel forces of supply and demand are unfair
![Page 58: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/58.jpg)
Price Ceiling
Maximum price that can be charged set by government
Example = Rent Control
![Page 59: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/59.jpg)
Price Floor
Government set minimum priceExample = minimum wage
![Page 60: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/60.jpg)
![Page 61: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/61.jpg)
Price as Signals
Determine What to produce by telling producers what they can make a profit off of
Determine How to produce – least costly means more profit
Determines Who gets what
![Page 62: WarmUp How would you describe supply and demand? How would you describe supply and demand?](https://reader035.vdocument.in/reader035/viewer/2022062516/56649e0e5503460f94af889a/html5/thumbnails/62.jpg)
Advantages of Price
Prices are Neutral – they do not favor producer or consumer
Prices are Flexible – they can adjust to changes in the market quickly
Prices provide Freedom of Choice – a variety of products at different prices allows consumers to choose
Prices are Familiar – they are easily understood