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Supply and Demand

Supply and Demand. The Basic Graph (aka “The Starting Point”). Equilibrium. Definition for Supply. The total amount of a good or service producers are willing and able to make at all prices at a specific point in time. or. Law of Supply.

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Supply and Demand

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  1. Supply and Demand

  2. The Basic Graph (aka “The Starting Point”) Equilibrium

  3. Definition for Supply • The total amount of a good or service producers are willing and able to make at all prices at a specific point in time.

  4. or Law of Supply • States that as price increases (or decreases) the quantity supplied also increases (or decreases).

  5. Things (determinants that could shift (change) the SUPPLY of a product • Price and availability of land, labor and capital (OJ v. cold winter) • New technology (cotton gin) • Number of other sellers (grocery stores in M’town)

  6. Things (determinants that could shift (change) the SUPPLY of a product, cont. • Price of other goods I could produce (fresh fruits/vegetables in summer v. winter) • Taxes (if they increase overall cost goes up too)

  7. S2 S2 Graphing a Shift in Supply(start w/ the basic graph)

  8. Graphing a Shift in Supply • The NEW supply line (S2) is called the Supply Curve. That’s Crazy – it’s a straight line! (don’t let that throw you off)

  9. S2 P2 Q2 Graphing a Shift in Supply (show the new price/quantity)

  10. Definitions for Demand • The total amount consumers are willing and able to buy at all prices at a specific point in time.

  11. Law of Demand • States that as price increases (or decreases) the quantity demanded decreases (or increases). or

  12. Things (determinants) that could shift (change) the DEMAND for a product • Tastes and fads (McNabb shirts) • Income (Prada, Coach, BMW) • Number of buyers (Burger King)

  13. Things (determinants) that could shift (change) the DEMAND for a product, cont. • Future price expectations (SUVs when gas increases) • Price and availability of • Substitutes (Uggs v. no name) • Compliments (jam/jelly w/ PB)

  14. D2 D2 Graphing a Shift in Demand(start w/ the basic graph)

  15. Graphing a Shift in Demand • The NEW Demand line is called the Demand Curve. That’s Right Folks – it’s also a straight line!

  16. P2 D2 Graphing a Shift in Demand (show the new price/quantity) Q2

  17. I R D L Always remember it so you know whether to shift right or left(for either supply or demand). . .

  18. I R D L stands for . . . • Increase • Right • Decrease • Left

  19. Let’s Try It! Imagine you are reading a newspaper and come across the following headlines . . .

  20. Two Major Computer Manufacturers Build Five New Factories • Does it deal with Supply or Demand? • Supply • Does supply increase or decrease? • Increase • Does the supply curve shift to the right or left? • Right

  21. Doctors announce benefits of eating ice cream Try Another

  22. Car Manufacturer Announces Plans for SUV Price Increase in Two Months Here’s a Tricky One

  23. Toyota unveils new car that gets 97 mpg!

  24. Protected Owls Discovered in Lumber Forest! Companies told to discontinue logging.

  25. For Group Charting • Two markers • One big sheet of paper • One headline

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