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Chapter 7: Demand and Supply

Chapter 7: Demand and Supply. Demand Shifters. What are the 5 determinants that can shift the demand curve? Population Income Tastes and Preferences Substitutes Complimentary Goods Give a “thumbs up” for an increase in demand and a “thumbs down” for a decrease is demand. . Scenario 1.

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Chapter 7: Demand and Supply

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  1. Chapter 7: Demand and Supply

  2. Demand Shifters What are the 5 determinants that can shift the demand curve? • Population • Income • Tastes and Preferences • Substitutes • Complimentary Goods Give a “thumbs up” for an increase in demand and a “thumbs down” for a decrease is demand.

  3. Scenario 1 Schools across the country stop using textbooks. What will happen in the market to the demand for textbooks? Why? Decrease, there will be fewer consumers in the market.

  4. Scenario 2 Doctors have excellent results using vitamin E to cure acne. What will happen in the market to the demand for vitamin E? Why? Increase, change in consumers tastes and preferences.

  5. Scenario 3 A law is passed guaranteeing students ages 10 and older a minimum allowance of $10.00 per week. What will happen in the market to the demand for compact discs? Why? Increase, consumer income increased.

  6. Scenario 4 The price of Bola Cola (a substitute for Bubble Soda) decreases. What will happen in the market to the demand for Bubble Soda? Why? Decrease, because the price of a substitute good decreases.

  7. Chapter 7 Section 3: The Law of Supply and the Supply Curve

  8. Warm Up • The Law of Demand emphasizes CONSUMER willingness to buy. • What is the relationship between Price and Quantity Demanded? • How does the Demand Curve slope? • Supply is the PRODUCERS perspective of the market.

  9. I. A. Introduction The Law of Supply states that Price and Quantity Supplied move in the same direction (Direct Relationship)

  10. II. The Incentive of Greater Profits • The higher the price the higher incentive for a producer to produce more. • Prices go up to cover additional costs of production. • They allow more producers to cover their costs and make a profit.

  11. III. The Supply Curve The quantities supplied at each possible price.

  12. IV. Quantity Supplied vs. Supply • A change in price. • If more goods or fewer goods are produced at every possible point.

  13. V. The Determinants of Supply • It Shifts to the right because supply will increase. • Supply increases. • Increase supply.

  14. VI. The Law of Diminishing Returns Adding units of a factor of production to all other factors of production increases total output.

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