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Supply and Demand

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Shows the basics of supply and demand. Includes Reggie Bush, Aggie War Hymnn and many other examples

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Supply and Demand

1. 1. Supply and Demand
2. 2. Supply and Demand
3. 3. \$5 4 3 2 1 … a specified time period … other things being equal 10 20 35 55 80 Price decreases ; QD increases Consumers “willingness to buy” \$5 \$4 \$3 \$2 \$1 D 0 10 20 35 55 80 Quantity Demanded DEMAND SCHEDULE P Q D
4. 4. To M arket D emand “ JO” \$3 \$3 \$3 + + 35 39 26 \$3 100 From “individual” demand to “market” demand [Total] “ Bo” “ Mo” D D D D = And, what if the price of this product drops from \$3 to \$2? Individual Demand \$2 40 \$2 45 \$2 30 \$2 115
5. 5. . As price decreases … QD increases . 50 .10 \$1 I n v e r s e QD 1 QID 2 QD 3 “ Let’s also buy coke for just .10.” Price QD .50 Law of Demand for Coca Cola If Coke, Pepsi, Dr. Pepper, 7-Up, Sprite, Root Beer, & Mountain Dew were all selling for \$1, who would buy Coke? OK, Here you are. How many of you non-Coke drinkers would buy Coke for just .50? OK, H ere you are , the “added buyer” coke drinkers. Now, how many of you non-Coke drinkers would buy Coke for just .10? And, here are even more “added buyer” coke drinkers. We have demonstrated the “income effect” . Lower prices increased income so more was consumed. A nd – the “substitution effect”, consumers of higher priced soft drinks bought the lower priced Coke.
6. 6. QD 2 QD 1 Price QD Inverse relationshi p \$499.00 [ with 2 yr contract] D Reasons For Downsloping “D” Curve 1. Income Effect –current buyers buy more. 2. Substitution Effect – new buyers now purchase. 3. Diminishing Marginal Utility - because buyers of successive units receive less marginal utility, they will buy more only when the price is lowered. Change in QD 1. Price change 2. Movement [up/down the demand curve] 3. Point to point [along the curve] “ D” refers to the “whole curve”. [ “all prices” ] “ QD” refers to a “point on the curve” based on a “particular price.” Law of Demand [Change in QD] \$350.00 iPhone
7. 7. “ Demand Shifters” [TIMER] 1. T aste [ direct ] 2. I ncome [normal- direct ] [inferior- i n v e r s e ] 3. M arket Size [number of consumers- direct ] 4. E xpectations [of consumers about future *price - direct , about future availability- i n v e r s e , or about future income– direct . 5. R elated Good *Prices [substitutes- direct ] [complements- i n v e r s e ] Changes in “D” [curve] 1. Non price change [ “TIMER” ] 2. Whole “D” curve shifts [There is a change in “QD” but it is not caused by a change in “price.” [ QD-”single price” ; D-”all prices” ] Complement [ i n v e r s e ] Substitute [ Direct ] Butter Bread Bagels P D 3 D 1 D 3 QD 3 QD 1 QD 2 D 1 D 2 P P 1 QD 1 QD 2 P 2 D 1 D 2 D P
8. 8. [ Decrease in price of one; increase in the “D” for the other] Car Prices Gasoline Demand P QD QD D 1 They are so cheap that even dogs are buying cars P 1 P 2 QD 1 QD 2 No chg in price I’m making more money without dropping my prices. D 2 Complements - Inverse
9. 9. . QS 2 Direct Reasons For Upsloping “S” Curve 1. There is increasing opportunity cost if you don’t produce. 2. Current producers produce more [overtime/more shifts] 3. New producers are attracted to the market. “ S” refers to the “whole supply curve” and refers to what producers will supply at “different prices” “ QS” refers to a “point on the curve” and refers to what producers will supply at a “particular price” Change in “QS” 1. Price change 2. Movement (up/down “S” curve) 3. Point to point (along “S” curve) S QS 1 P 2 P 1 Price increases ; QS increases Price decreases ; QS decreases Producers want the highest price possible. Law of Supply
10. 10. Aggieland Football Season Tickets \$90 Why do the Ags have a scoreboard on the outside of the stadium?
11. 11. The Aggies have a scoreboard outside so that the 5 Reveilles who are buried outside the stadium can see the scoreboard. The 5 mascots are ranked as 5-Star generals and are buried facing the scoreboard . The Plaque says this: “ Reveille 1 st , and the other Reveilles that follow her, will always have a special place in an Aggie’s heart and symbolize the undying spirit of Texas A&M .” The Aggie War Hymn Hullabaloo, Caneck, Caneck Hullabaloo, Caneck, Caneck Good bye to texas university So long to the orange and the white Good luck to dear old Texas Aggies T hey are the boys who show the real old fight ‘ the eyes of Texas are upon you’ That is the song they sing so well Sounds Like hell So good bye to texas university We’re gonna beat you all to Chigaroogarem Chigaroogarem Rough, Tough, Real stuff, Texas A&M LyricsOnDemand.® All lyrics are property and copyright of their owners.  All lyrics provided for educational purposes only. © 2006 LyricsOnDemand.com
12. 12. Southern California at LA Memorial Coliseum National Champs 2003-2004
13. 13. Southern Cal Football Season Tickets \$90
14. 15. The End Go to Animationeconomics.com to get the whole economics course in animation