Goal 8 supply and demand changes
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Goal 8 supply and demand changes

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Goal 8 supply and demand changes Goal 8 supply and demand changes Presentation Transcript

  • Laws of Demand
    Goal 8
  • Discuss
    What is a market?
    In a market who is the consumer?
    How does the price of a good affect the consumer?
  • Market
    An arrangement that allows buyers and sellers to exchange things
    Markets exist because no one is self sufficient and no one produces all we require to satisfy all our needs and wants.
  • Demand
    Description
    The quantities of a particular good or service consumers are willing and able to buy at different possible prices at a particular time
  • Demand Illustration p.1 sec. 1
    As price goes up, quantity demanded goes down
    Price
    D1
    Quantity
  • Discuss
    How does demand and “want” or “desire” differ?
    You may want or desire a new car or a closet full of clothes, but you demand these things only when you are willing and able to buy them.
  • Quantity Demand
    The quantities of a particular good or service consumers are willing and able to buy at set prices at a particular time
  • Quantity Demand Illustration
    Price
    D2
    Quantity
  • Demand Schedule
    How much people are going to buy at the various prices.
    Ex. The price of pizza
    Price
    Quantity
    $.50
    $1.00
    $1.50
    $2.00
    $2.50
  • Law of Demand
    As price goes up quantity goes down
    As price goes down quantity goes up
    People buy less of something at higher prices than they do at lower prices.
  • ELASTIC DEMAND:
    demand that is very sensitive to a change in price
    goods that one might stop buying or cut back on as price increased (SUVs, Luxury items)**on a graph this demand curve will be FLAT
  • INELASTIC DEMAND
    demand that is not very sensitive to a change in price
    goods that you would buy at any price; there are few if any substitutes for these goods.
    (milk, gas, prescription drugs) **on a graph this demand curve would be very steep.
  • Illustration of Decrease and Increase in Demand
    Decrease in Price
    Increase in Price
    Price
    Price
    D2
    D1
    D2
    D1
    Quantity
    Quantity
    The less you buy the more you will move to the left!
  • The Demand Curve
    The Demand Curve slopes downward to the right because the consumer is willing and able to buy more gasoline at lower prices than at higher prices.
  • Scenario #1
    Harris Teeter is advertising a sale on hot dog buns. What is the impact on the demand for hot dogs?
  • Scenario #2
    Playstation 3, the newest video game console, hits stores. What is the impact on the demand for Xbox 360?
  • Scenario #3
    The weatherman forecasts rain for the weekend in Charlotte. What is the impact on the demand for umbrellas?
  • Scenario #4
    The N.C. General Assembly increases minimum wage to $7/hour. What is the impact on the demand for clothing?
  • Scenario #5
    A snowy blizzard blows through Charlotte. What is the impact on the demand for snow boots?
  • Scenario #6
    The price of MP3 players decreases dramatically due to new technology. What is the impact on the demand for portable CD players?
  • Scenario #7
    Summertime is approaching. What is the impact on the demand for shorts?
  • Scenario #8
    The price of hamburgers increases at Food Lion. What is the impact on the demand for French fries?
  • Changes in Demand
  • Reasons Demand can change
    People’s Income
    Weather
    Complementary Goods
    Substitute Goods
  • What is a Complementary Good?
    Complementary Good: Two goods that are usually consumed together (Hot Dogs & buns)
  • What is a Substitute Good?
    Substitute Good: An acceptable replacement for a good (Playstation & Xbox)
  • People’s Income Increases
    P
    Effect on Demand
    Demand Increases
    (shift right)
    D1
    D2
    Q
  • Bad Weather (for product)
    Effect on Demand
    Demand Decreases
    (shift left)
    P
    D1
    D2
    Q
  • Price of Complementary Good Decreases (ex: peanut butter & jelly)
    P
    Effect on Demand
    Demand Increases
    (shift right)
    D1
    D2
    Q
    Peanut Butter
  • Price of Substitute Good Decreases (ex: Pepsi & Coca-Cola)
    P
    Effect on Demand
    Demand Decreases
    (shift left)
    D1
    D2
    Q
    Pepsi
  • Complementary vs. Substitute
    Can YOU tell the difference????
  • Substitute
  • Complementary
  • Substitute
  • Complementary
  • Substitute
  • Substitute
  • Complementary
  • Elasticity of Demand
    How much the quantity demanded will change if the price rises or falls.
  • Supply
  • Discuss
    Now you are the producer
    Think about the business you are creating
    Things are now going to reverse
  • Supply
    Description
    The quantity of goods a producer is willing and able to sell at various prices at a particular time.
    P
    S1
    Q
  • Quantity Supplied
    The quantity of goods a producer is willing and able to sell at a set price at a particular time.
    P
    S1
    Q
  • Supply Schedule
    A list of quantities supplied by a provider at certain prices
    Price
    Quantity
    $.50
    1
    $1.00
    2
    $1.50
    3
    $2.00
    4
    $2.50
    5
  • Law of Supply
    As price goes up, quantity goes up
    As price goes down, quantity goes down
    More items will be offered for sale at a higher price than at a lower price
  • Illustrate an Increase in Supply
    Price
    S1
    S2
    Quantity
  • Illustrate a Decrease in Supply
    Price
    S2
    S1
    Quantity
  • Supply Curve
    The Supply Curve slopes upward and to the right because the producer is willing and able to sell more products at higher prices than at lower prices.
  • Change in Supply
  • Reasons for change in Supply
    Cost of Inputs
    Number of Suppliers
    Weather
  • Costs of Inputs Decrease
    Effect on Supply
    Supply Increases
    (shift right)
    Spending less to run the business
    Examples
    Land
    Labor
    Capital
    P
    S1
    S2
    Q
  • Number of Suppliers Increases
    Effect on Supply
    Supply Increases
    (shift right)
    Example: Basketballs
    Dicks Sporting Goods
    Sports Authority
    Footlocker
    P
    S1
    S2
    Q
  • Weather is bad for product
    S2
    Effect on Supply
    Supply Decreases
    (shift left)
    Example
    A hurricane during the orange growing season
    P
    S1
    Q
  • SO… can you apply this knowledge?
    1) Together lets decide if the following scenarios are a change in…
    Input costs
    Number of suppliers
    Weather
    2) Then decide if it will
    Increase supply
    Decrease Supply
  • Situation #1
    Dick’s Sporting Goods goes out of business. What is the impact on basketballs in Charlotte?
    -number of suppliers changes
    -Supply Decreases
  • Situation #2
    A hurricane destroys the orange groves in Florida. What is the impact on the supply of Orange Juice?
    -weather changes
    -Supply Decreases
  • Situation #3
    The price of gas decreases. What is the impact of trucking companies?
    -cost of inputs change
    -Supply Increase
  • Situation #4
    Nike moves their factory from the U.S. to China where workers are paid less. What is the impact on the supply of Nike’s shoes?
    -change in input costs
    -Supply Increases
  • Supply and Demand together
  • Equilibrium: the point at which quantity demanded and quantity supplied are equal
  • At a point of equilibrium….
    the price and quantity are balanced
    the market for a good/service is stable
  • Disequilibrium: any price or quantity not at equilibrium
  • Excess Demand: when quantity demanded is more than quantity supplied
    aka SHORTAGE!!!!
    shortage
  • Excess Supply: when quantity supplied is more than quantity demanded
    aka SURPLUS!!!!
    surplus
  • A shift in the demand curve or the supply curve will result in a new equilibrium price.
  • Government Intervention in a Market Economy
    Price Ceiling: a maximum price that can be legally charged for a good or service
    (example: rent control)
     Price Floor: a minimum price for a good or service
    (example: minimum wage)
  • Inflation and Deflation
     Inflation: a general increase in prices (over the years, prices rise and fall, but in the American economy, they have mostly risen)
     Deflation: A substantial drop in the prices