The document discusses the laws of supply and demand. It defines quantity demanded and quantity supplied, and explains how each is affected by different variables according to the laws of supply and demand. Specifically, it states that quantity demanded decreases when price increases, and quantity supplied increases when price increases. It also provides examples of how to analyze the effects of events using supply-demand diagrams.

1. Mr. Rey Belen

2. The Quantity Demanded of any good is the amount of the good that buyers are willing and able to purchase. Law of Demand: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal.

4. Variable A change in this variable Own Price …causes a movement along the D curve # of buyers …shifts the D curve (Normal vs. Inferior) Income …shifts the D curve Price of related goods …shifts the D curve (Substitutes vs. Complements) Tastes …shifts the D curve Expectations …shifts the D curve

5. The Quantity Supplied of any goods is the amount that sellers are willing and able to sell. Law of Supply: the claim that the quantity supplied of a good rises when the price of the goods rises, other things equal.

7. Variable A change in this variable Own Price …causes a movement along the S curve Input Prices …shifts the S curve (minimum wage increase) Technology …shifts the S curve # of Sellers …shifts the S curve Expectations …shifts the D curve

8. PRICE QUANTITY D S Equilibrium: P has reached the level where quantity supplied equals quantity demanded

9. PRICE QUANTITY D S When quantity supplied is greater than quantity demanded SURPLUS

10. PRICE QUANTITY D S When quantity demanded is greater than quantity supplied SHORTAGE

11. To determine the effects of any event, Decide whether event shift S curve, D curve, or both. Decide in which direction curve shifts. Use supply-demand diagram to see how the shift changes eq’m P and Q .

12. PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS D1 S1 Analyze the effect of: -Increase in price of gas -New technology reduces cost of producing diesel cars P1 Q1

13. D1 S1 Event to be analyze: -Increase in price of gas P1 Q1 Step 1: D curve shifts to the right The shift causes an increase in price and quantity of diesel cars P2 D2 Q2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS

14. D1 S1 Event to be analyze: -New technology reduces cost of producing diesel cars. P1 Q1 Step 1: S curve shifts to the right The shift causes price to fall and quantity to rise P2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS

15. D1 S1 P1 Q1 P2 D2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS

16. D1 S1 P1 Q1 P2 D2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS

18. No Change in Supply An Increase in Supply A Decrease in Supply No Change in Demand P same Q same P down Q up P up Q down An Increase in Demand P up Q up P ambiguous Q up P up Q ambiguous A Decrease in Demand P down Q down P down Q ambiguous P ambiguous Q down

19. PRICE QUANTITY D1 S1 P1 Q1