4. Demand Schedule
A listing that shows the quantity
demanded at all prices.
Price Per
CD
# of CDs
Demanded
$1 300
$2 162
$3 94
$4 58
$5 37
$6 25
$10 18
$15 13
$20 10
9. Q: What causes a shift in Demand?
A: Non-price determinants
Price
Quantity Demanded
Decrease
in demand
Increase
in demand
10. Non-Price Determinants of
Demand
1) Buyer’s Income
2) Price of Substitutes
3) Market Size
4) Consumer Tastes
5) Consumer Expectations
6) Complement Goods
11. 1) Buyer’s Income
Income Demand
Income Demand
Examples:
- Minimum wage increases
- Economic Recession
- The Great Depression
12. 2) Price of Substitute Goods
Goods or services that can be used
instead of other goods or services,
causing a change in demand.
13. 3) Market Size
Market Size Demand
Market Size Demand
Examples:
Immigration
Detroit after collapse of auto industry
14. 4) Consumer Tastes
The popularity of a good or service has a strong
effect on the demand for it, and in the
marketplace, popularity can change quickly.
15. 5) Consumer Expectations
What you expect prices to do in the
future
can influence your buying habits today.
Examples:
HD TV’s
PS3
Gasoline
Homes
Automobiles
17. Supply
The desire, ability, and willingness
to offer products for sale
*Anyone who offers an economic product
for sale is a supplier
*When you work at your job, you are
offering your services for sale. Your
economic product is labor. You would
probably supply more for a higher wage.
18. Law of Supply
P= Price QS= Quantity Supplied
P QS
P QS
Super bowl
commercial
19. The Law of Supply Graph
Quantity Supplied
Price
20. Q: What causes a change in quantity supplied?
A: Price
Quantity Supplied
Price
21. Q: What causes a shift in supply?
A: Non Price Determinants of Supply
Price
Quantity Supplied
Decrease
in supply
Increase
in supply
22. Non-Price Determinants of
Supply
1) Number of Products
2) Input Costs
3) Labor Productivity
4) Technology
5) Government Action
6) # of sellers
7) Producer Expectations
23. 1) Number of Products
A successful new product or service always brings out
competitors who initially raise overall supply.
24. 2) Input Costs
Input costs, the collective price of resources that
go into producing a good or service, affect
supply directly
Examples
Minimum Wage increases
Cost of cotton increases, supply of t-shirts decreases
25. 3) Labor Productivity
Better trained or more-skilled workers are usually more
productive. Increased productivity decreases costs
and increases supply.
26. 4) Technology
By applying scientific advances to the production
process, producers have learned to generate their
goods or services more efficiently.
27. 5) Government Action
Government actions, such as taxes or subsidies,
can
have a positive or negative effect on production
costs.
28. 6) # of Sellers
# of sellers increases, supply increases
# of sellers decreases, supply decreases
Examples:
McDonald’s Plans to Open 1,000 new stores in
2010
All Circuit City stores in America went out of
business
29. 7) Producer Expectations
The amount of a product that producers are willing
and able to supply may be influenced by
whether they believe prices will go up or down.
34. Shift in the Supply Curve
For an given rental price, quantity supplied is now
lower than before.
35. Market Equilibrium
Situation in which prices are relatively stable and
the quantity of goods or services supplied is
equal to the quantity demanded.
QS = QD
Equilibrium Price – the price that “clears the
market.” No Shortage or Surplus.
37. Surplus
Situation in which the quantity supplied is
greater than the quantity demanded at a given
price.
QS > QD
P
Note: If there is a surplus, prices generally fall
38. Quantity
Price
0 500 1000 1500 2000
0
1
2
3
4
5
6
7
8
9
10 Surplus of 700
At $8 there is a surplus of 700
39. Shortage
The situation in which the quantity demanded is
greater than the quantity supplied.
QD > QS
P
Note: If there is a shortage, prices generally rise
40. Quantity
Price
0 500 1000 1500 2000
0
1
2
3
4
5
6
7
8
9
10
A price of $3 causes a shortage of 900 units.
Shortage of 900
41. Equilibrium After a Demand Shift
The shift in the demand curve moves the market
equilibrium from point A to point B, resulting in a
higher price and higher quantity.
42. Equilibrium After a Supply Shift
The shift in the supply curve moves the market equilibrium
from point A to point B, resulting in a higher price and lower
quantity.
43. Demand Elasticity
A term used to indicate the extent to which
changes in price cause changes in quantity
demanded.
44. Elastic Demand
Occurs when a relatively small change in price
causes a relatively large change in the
quantity demanded.
46. Estimating Elasticity of Demand
Yes = Elastic No = Inelastic
Can purchase be delayed?
Are there adequate substitutes?
Does purchase use a large portion of income?
2 or more yes’s = elastic
2 or more no’s = inelastic
48. Necessity
The more necessary a good is, the lower the
elasticity, as people will attempt to buy it no
matter the price, such as the case of insulin for
those that need it.