Opening Pair-Share

WHAT DO KOBE BRYANT, A 1962 CORVETTE, AND A DIAMOND

HAVE IN COMMON?

Supply and Demand

What is Demand?The willingness to own a product and the ability

to pay for it.

What is Supply?The amount of

goods available.

The Law of Supply and DemandSupply and demand depend on and

respond to price.

If PRICE then, DEMAND and SUPPLY

If PRICE then, DEMAND and SUPPLY

What is the Substitution Effect?When consumers react to an increase

in price, they

1) Consume less of that product

2) Find an alternative

Example: movies vs. Netflix

What is the Income Effect?A change in income will determine if

you buy more or less of a product.

Example: get raise, buy more clothes

What is a Demand Curve?

What is a Supply Curve?

What Causes the S & D Curve to Shift?

If S & D increases, the curve shifts right.

If S & D decreases, the curve shifts left.

What Causes the Demand Curve to Shift?

1. INCOME

Normal Good: Something you buy more of if your income increases. (TV, NEW clothes)

Inferior Good: Something you buy less of if your income increases. (USED clothes, inflatable pool)

2. CONSUMER EXPECTATIONS: Knowing the price will change affects your purchase.

3. POPULATION

EX: Baby boom (need food, clothes, diapers, homes, etc.)

4. CONSUMER TASTES AND ADVERTISING: Changing trends.

5. RELATED GOODSCOMPLEMENTS: Goods

that are bought and used together.

EX: DVD and DVD Player

SUBSTITUTES: Goods used in place of one another.

What Causes Supply to Change?1. Cost of factors of production2. Technology3. Taxes/Govt. policies4. # of firms in the marketplace5. Weather

What is Equilibrium?When Qd=Qs.

What is Excess Demand?When Qd is greater than Qs.

(Shortage)

What is Excess Supply?When Qs is greater than Qd.

(Surplus)

SummaryIN ONE, LONG SENTENCE, MAKE A

CONNECTION BETWEEN SCARCITY, CHOICE, FACTORS OF

PRODUCTION, THE THREE ECONOMIC QUESTIONS, FREE

ENTERPRISE, AND SUPPLY AND DEMAND.