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WarmUp

WarmUp. How would you describe supply and demand?. Unit II: How Markets Work. Part I – Supply and Demand. Demand. The desire, willingness and ability to buy a good or service. Affective Demand. Must want to buy Must be willing to buy Must have the resources to buy.

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WarmUp

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  1. WarmUp • How would you describe supply and demand?

  2. Unit II: How Markets Work Part I – Supply and Demand

  3. Demand • The desire, willingness and ability to buy a good or service

  4. Affective Demand • Must want to buy • Must be willing to buy • Must have the resources to buy

  5. What is market demand? • The total amount of demand created by all consumers for a product

  6. Demand Schedule • A table that lists the various quantities of a product that will be bought at different prices

  7. Demand Curve • A graph that shows the amount of a product that will be bought at all possible prices

  8. Direction of the Demand Curve • Downward Slope

  9. What does the law of demand state? • As price goes UP demand goes DOWN and visa versa

  10. What does utility refer to? • Satisfaction

  11. Diminishing Marginal Utility • Principle that additional satisfaction goes down as we consume more of a product

  12. 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

  13. Decrease in demand at every price will produce a Left shift in demand curve

  14. An increase in demand at every price will produce a right shift in demand curve

  15. Demand Elasticity • How much demand for a product is affected by a change in price

  16. Factors affecting elasticity • Percentage of Income • Availability of substitutes • Necessity or Luxury • Length of time

  17. Warmup • What is the law of demand?

  18. What is supply? • The various amounts of a good or service that producers will supply at different prices

  19. The Law of Supply • Suppliers will generally offer more for sale at higher prices and less at lower prices.

  20. What does a Supply Schedule illustrate? • How much will be supplied at different prices

  21. Supply Schedule for Video Games

  22. What does a supply curve illustrate? • The amount of a good or service that will be supplied at different prices

  23. In what direction does the supply curve slope reading from left to right? • Upward

  24. What can cause a shift in supply at every price?

  25. The Cost of Resources • The materials used to produce

  26. Productivity • How efficient the work force is

  27. Technology • The methods used to make goods and services …..and Now Then….

  28. Government Policies • Gov regulations increase costs of production

  29. Taxes • Higher taxes = higher costs • Lower taxes = lower costs

  30. Subsidies • Government payment to help do something (decreases costs)

  31. Expectations • What owners believe demand will be

  32. Number of Suppliers • More suppliers = more supply • Less suppliers = less supply

  33. Shift in Supply

  34. When market supply increases at every price the supply curve shifts to the • Right

  35. Now suppose the government increases taxes on the industry. • It will decrease • Label this on the graph assuming that 100 less will supplied label it S3

  36. 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

  37. What affects the elasticity of supply? • How quickly a company can change how much it produces

  38. Equilibrium Price • The price at which the amount demanded is equal to the amount supplied Pe Qe

  39. What is the equilibrium price of video games in our market? • $25

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