Supply and Demand

1. Supply and Demand

2. Table 1 Demand Schedule for Maple Syrup in the United States 03-102 table

3. Price per Bottle When the price is $4.00 per bottle, 40,000 bottles are demanded (point A). At $2.00 per bottle, 60,000 bottles are demanded (point B). Number of Bottles per Month Figure 1 The Demand Curve A $4.00 B 2.00 D 40,000 60,000

4. Table 2 Increase in Demand for Maple Syrup in the United States

5. An increase in income shifts the demand curve for maple syrup from D1 to D2. At each price, more bottles are demanded after the shift Price per Bottle D2 D1 Number of Bottles per Month Figure 2 A Shift of the Demand Curve B C $2.00 60,000 80,000

6. Price Price increase moves us leftward alongdemand curve Price increase moves us rightwardalongdemand curve Quantity Figure 3 Movements Along and Shifts of the Demand Curve (a) P2 P1 P3 Q2 Q1 Q3

7. Price Quantity Figure 3 Movements Along and Shifts of the Demand Curve (b) • Entire demand curve shifts rightward when: • income or wealth ↑ • price of substitute ↑ • price of complement ↓ • population ↑ • expected price ↑ • tastes shift toward good D2 D1

8. (c) Price • Entire demand curve shifts leftward when: • income or wealth ↓ • price of substitute ↓ • price of complement ↑ • population ↓ • expected price ↓ • tastes shift toward good D1 D2 Quantity Figure 3 Movements Along and Shifts of the Demand Curve

9. Table 3 Supply Schedule for Maple Syrup in the United States

10. Price per Bottle When the price is $2.00 per bottle, 40,000 bottles are supplied (point F). S $4.00 G At $4.00 per bottle, quantity supplied is 60,000 bottles(pointG). 2.00 F Number of Bottles per Month 40,000 60,000 Figure 4 The Supply Curve

11. Table 4 Increase in Supply of Maple Syrup in the United States

12. Figure 5 A Shift of the Supply Curve

13. Price Price increase moves us rightward alongsupply curve Price increase moves us leftwardalongsupply curve Quantity Figure 6 Changes in Supply and in Quantity Supplied (a) S P2 P1 P3 Q3 Q1 Q2

14. Price Quantity Figure 6 Changes in Supply and in Quantity Supplied (b) S1 • Entire supply curve shifts rightward when: • price of input↓ • price of alternate good ↓ • number of firms ↑ • expected price ↑ • technological advance • favorable weather S2

15. Price Quantity Figure 6 Changes in Supply and in Quantity Supplied (c) • Entire supply curve shifts rightward when: • price of input↑ • price of alternate good ↑ • number of firms ↓ • expected price ↑ • unfavorable weather S2 S1

16. 2. causes the price to rise . . . 3. shrinking the excess demand . . . Price per Bottle 4. until price reaches its equilibrium value of $3.00 . Number of Bottles per Month 1. At a price of $1.00 per bottle an excess demand of 50,000 bottles . . . Figure 7 Market Equilibrium S E $3.00 H J 1.00 Excess Demand D 25,000 50,000 75,000

17. 1. At a price of $5.00 per bottle an excess supply of 30,000 bottles . . . Price per Bottle 3. shrinking the excess supply . . . 2. causes the price to drop, 4. until price reaches its equilibrium value of $3.00. Number of Bottles per Month Figure 8 Excess Supply and Price Adjustment Excess Supply at $5.00 S $5.00 L K E 3.00 D 35,000 50,000 65,000

18. 3. to a new equilibrium. 4. Equilibrium price increases Price per Bottle 2. moves us along the supply curve . . . 1. An increase in demand . . . Number of Bottles of Maple Syrup per Period 5. and equilibrium quantity increases too. Figure 9 A Shift in Demand and a New Equilibrium S F' $4.00 E 3.00 D2 D1 50,000 60,000

19. Price per Bottle Number of Bottles Figure 10 A Shift in Supply and a New Equilibrium S2 S1 E' $5.00 3.00 E D 35,000 50,000

20. Price per Handheld PC 3. moved the market to a new equilibrium. 2. and a decrease in demand . . . 4. Price decreased . . . 1. An increase in supply . . . Millions of Handheld PCs per Quarter 5. and quantity decreased as well. Figure 11 Changes in the Market for Handheld PCs S2002 S2003 A $500 B $400 D2002 D2003 2.45 3.33

21. Table 5 Effect of Supply and Demand Shifts on Equilibrium Price (P) and Quantity (Q)

22. Price per Barrel of Oil Barrels of Oil Figure 12 The Market for Oil S2 S1 E' P2 E P1 D Q2 Q1

23. Price per Cubic Foot of Natural Gas Cubic Feet of Natural Gas Figure 13 The Market for Natural Gas S F' P4 F D2 P3 D1 Q3 Q4