More income results in more demand for new cars; less demand for used cars

Less income results in more demandfor used cars;less demand for new cars.

……

More demand More demand for both newfor both new

and used carsand used cars

New CarsNew Cars Used CarsUsed Cars

• Future availability of milk

• If there is a suspected shortage of milk consumers will stock up now to avoid risk of not getting any.

• If there is a price change where there is an introductory price (300 dollars for an iPhone 5) consumers will buy now to avoid risk of paying more later.

• If there is a price change where there will be a sale (back down to 300 dollars from 800 dollars for 1 week only!), consumers will buy now to avoid risk of paying more later.

• Future income• If we are coming out of a recession and

consumers feel secure about their jobs = positive future income.

• Future income

• If we are going into a recession and consumers don’t feel secure about their jobs = negative future income

• Complement (Inverse) – Milk

• Substitute (Direct) – Pop Tarts

Substitutes-Direct; Complements-Inverse

…………………………

• Wages and raw materials are resources

• If resource cost decreases – supply increases

• If resource cost increases – supply decreases

Substitutes in Production

Producers want to produce more of the good Producers want to produce more of the good where price is increasingwhere price is increasing,,

……or at least, where the price is not going or at least, where the price is not going down.down.

• Because one person on a computer can produce more documents, offices don’t have to have as many secretaries.[saves $]

expect future oil prices to decline, they will increase current production.

expect future oil prices to increase, they will decrease current production

• A benefit given by the government to groups, companies or individuals usually in the form of a cash payment or tax reduction.

• The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

• There are many forms of subsidies given out by the government, welfare, housing loans, student loans and farm subsidies.

• For example, if a domestic industry, like farming, is struggling to survive in a highly competitive international industry with low prices, a government may give cash subsidies to farms so that they can sell at the low market price but still achieve financial gain.

If business have their taxes decreased,it moves the supply curve to the right (INCREASE SUPPLY)

If business have their taxes increased, it moves the supply curve to the left (DECREASE SUPPLY)