Lesson 7 - shifting the supply and demand curve - power point - duke

Now shift it out…

*Demand and Supply

Price Quantity Demanded

.10 350

.15 300

.20 250

.25 200

.30 150

.35 100

.40 50

Binxy Cat Demand Schedule

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

D

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

The data for demand curve D indicates that at a price of .30 per Binxys, buyers would be willing to buy __________ million Binxys. Other things constant, if the price for Binxys increased to .40 per Binxy, buyers would be willing to buy _______ million Binxy. Such a change would be a decrease in____________. Other things constant, if the price of Binxys decreased to .20, buyers would be willing to buy _________ million Binxys. Such a change would be called an increase in _____________________.

150

50100 million

250

Quantity Demanded

Price Quantity Demanded

.05 300

.10 250

.15 200

.20 150

.25 100

.30 50

Now, let’s suppose there is a dramatic change in Federal income-tax rates that affects the disposable income of Binxy buyers. This change in income will result in a new set of data. Use the data below to plot the new demand curve for Binxys on the front page of this packet. Label the new demand curve D1 and fill in the information below.

Demand Shift: D1

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

DD1

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

Comparing the new demand curve (D1) with the original demand curve (D), we can say that the change in the demand for Binxys results in a shift of the demand curve to the ___________________.  Such a shift indicates that at each of the possible prices shown, buyers are now willing to buy a _________________quantity; and at each of the possible quantities shown, buyers are willing to offer a _________________ maximum price. The cause of this demand curve shift was an___________ in tax rates that ____________________ the disposable income of Binxy buyers.

left

smaller

lower

increase decreases

Demand Shift: D2

Now, let’s suppose that there is a dramatic change in people’s tastes and preference for Binxys. This change will result in a new set of data. Use the data below to plot the new demand curve for Binxys on the front of this packet. Label the new demand curve D2 and fill in the information below.

Price Quantity Demanded

.20 350

.25 300

.30 250

.35 200

.40 150

.45 100

.50 50

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

D

D2

D1

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

Comparing the new demand curve (D2) with the original demand curve (D), we can say that the change in the demand for Binxys results in a shift of the demand curve to the _____________________. Such a shift indicates that at each of the possible prices shown, buyers are now willing to buy a ________________ quantity; and at each of the possible quantities shown, buyers are willing to offer a _________________maximum price. The cause of this shift in the demand curve was a change in people’s tastes and preference for Binxys.

right

larger

higher

Supply = Sellers

Law of Supply: tendency of suppliers to offer more of a good at a higher price.

Price SupplyPrice Supply

*How can we see the

Law of Supply?

Let’s use Binxy Cats……..(page 3)

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

D

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

S

Equilibrium Price

S1

P

Q

P

Q

*Factors that make the supply curve shift

1. Advances in technology.

Examples: LCD and Plasma televisions.P

rice

of

LC

D/P

lasm

a T

Vs

Quantity of televisions sold

S S1

2. Competition

Examples: Cell Phones.

Pri

ce o

f ce

ll p

ho

nes

Quantity of cell phones

S S1

3. Government InfluenceExamples:

Excise taxes: Causes a decrease in production.

Government Subsidies: Cause increase in production.

Pri

ce o

f ci

gar

ette

s

Quantity of cigarettes

S S1

Quantity of T-bone Steaks

S S1

Pri

ce o

f T-

bo

ne

Ste

aks

4. Production Costs

Examples: Fixed Costs (Rent).

Variable Costs (Heating).

Pri

ce o

f H

amb

urg

ers

Quantity of Hamburgers

S S1S2

5. Future Expectations of Price

Examples: Sun Screen in January.

Pri

ce o

f S

un

Scr

een

Quantity of Sun Screen

S S1

*Back to Binxys (page 4)

Price Quantity Supplied

.15 350

.20 300

.25 250

.30 200

.35 150

Binxy Cats Supply Schedule

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

S

Price Quantity Supplied

.20 300

.25 250

.30 200

.35 150

.40 100

Now, let’s suppose there is a dramatic change in the price of beef, a main ingredient in Binxys. This rise in the cost of production will result in a new supply curve. Use the data below to plot the new supply curve for Binxys. Label the new supply curve S1 and fill in the information below.

Supply Shift: S1

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

S

D1

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

S1

Price Quantity Supplied

.20 300

.25 250

.30 200

.35 150

.40 100

Now, let’s suppose there is a dramatic change in the price of beef, a main ingredient in Binxys. This rise in the cost of production will result in a new supply curve. Use the data below to plot the new supply curve for Binxys. Label the new supply curve S1 and fill in the information below.

Supply Shift: S1

*BinxysP

ric

es p

er

Bin

xy

Quantity (Millions of Binxys)

S

.55

.50

.45

.40

.35

.30

.25

.20

.15

.10

.05

50 100 150 200 250 300 350 400

S2

S S1S S1