Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
Supply and Demand: What it is, how to graph it, and how to tell
the difference between the graphs!
• This is how you may see the supply and demand graphs on your test! They may look slightly different on the EOC (which is why I have them look slightly different on the quizizz)—but the major elements will be the same!
Copy these graphs into your notes! You will need to know how to draw them later!
• A: Increase in demand
• B: Decrease in demand
• C: Increase in supply
• D: Decrease in supply
Graphing Demand
3
The Demand Curve• A demand curve is a graphical representation of a
demand schedule.
• The demand curve is downward sloping showing the inverse relationship between price (on the y-axis) and quantity demanded (on the x-axis)
• When reading a demand curve, assume all outside
factors, such as income, are held constant.
Let’s draw a new demand curve for cereal…
4
GRAPHING DEMAND
5
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
Draw this large
in your notes
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
GRAPHING DEMAND
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
6
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
PRICE will cause movement along the Demand Curve…But there are 5 Things that will cause the demand curve to SHIFT!--_TRIBE
WILL CAUSE AN INCREASE IN
DEMAND (SHIFT TO THE RIGHT)
DETERMINANT (SHIFTER) WILL CAUSE A DECREASE IN
DEMAND (SHIFT TO THE LEFT)
• News article comes out talking about the benefit of a
product• Celebrity starts using product• Product becomes very popular
TASTES AND PREFERENCES
• News article comes out talking about the hazards of a product
• Celebrity stops using product• Product loses popularity
• Price of complementary goods goes down
• Price of substitute good goes up
RELATED GOODS
(COMPLEMENTS -AND SUBSTITUTES)
• Price of complementary goodsgoes up
• Price of substitute good goes down
• Income increases—demandfor normal goods increases
• Income decreases—demand for inferior goods increases
INCOME
• Income decreases—demand for normal goods decreases
• Income increases—demand for inferior goods decreases
• Increase in number of buyers—people move into an area BUYERS
• Decrease in number of buyers--people move out of an areas
• Buyers expect price of the good to increase in the future (they will want to buy it NOW)
EXPECTATIONS
• Buyers expect price of the good to decrease in the future (they will want to buy it LATER)
Change in demand Practice: Click through the following scenarios and see if you would be able to identify:
1. The effect on demand
2. The direction the demand curve would shift
Can you draw the graph?
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
10
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
What if cereal
makes you smarter?
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
11
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
12
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
13
PriceQuantity
Demanded
$5 10 30
$4 20 40
$3 30 50
$2 50 70
$1 80 100
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
14
PriceQuantity
Demanded
$5 10 30
$4 20 40
$3 30 50
$2 50 70
$1 80 100
Demand
D1
Increase in Demand
Prices didn’t change but
people want MORE
cereal
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
15
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
What if cereal
causes baldness?
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
16
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
17
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
18
PriceQuantity
Demanded
$5 10 0
$4 20 5
$3 30 20
$2 50 30
$1 80 60
Demand
Change in Demand
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
19
PriceQuantity
Demanded
$5 10 0
$4 20 5
$3 30 20
$2 50 30
$1 80 60
DemandD2
Decrease in Demand
Prices didn’t change but
people want LESS cereal
Change in Demand: Would this lead to an increase in demand for cereal or a decrease in demand for cereal…and WHY?
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Demand
Schedule
10 20 30 40 50 60 70 80
20
PriceQuantity
Demanded
$5 10
$4 20
$3 30
$2 50
$1 80
What if the price
of MILK goes up?
Demand
Answer: Decrease in Demand for Cereal
• Explanation: If the cost of milk (a complementary good) goes up, people will be buying less MILK and less CEREAL! The price of cereal does not change—but people want LESS of it (because now milk is more expensive)
Practice
MARKET: Hamburgers (a normal good)1. Population boom 2. Incomes fall due to recession3. Price for Carne Asada burritos falls to $1 4. Price increases to $5 for hamburgers5. New health craze- “No ground beef”6. Hamburger restaurants announce that they
will significantly increase prices NEXT month 7. Government heavily taxes shake and fries
causes their prices to quadruple.8. Restaurants lower price of burgers to $.50
First identify the determinant (Shifter). Then decide if demand will increase or
decrease. Finally—will the demand curve shift to the left or right?Graph it if you can!
22
CHECK YOUR ANSWERS:
(FOR THE GRAPHING PART, SEE THE
GRAPH EXAMPLES ON SLIDE #6)1. Number of consumers, increase. RIGHT
2. Income, decrease. LEFT
3. Substitutes, decrease. LEFT
4. Price doesn’t shift curve, no change.
5. Tastes and preferences, decrease. LEFT
6. Expectations, increase.LEFT
7. Complements, decrease. LEFT
8. Price doesn’t shift curve, no change.
23
Supply DefinedWhat is supply?
Supply is the different quantities of a good that sellers
are willing and able to sell (produce) at different prices.
What is the Law of Supply?
There is a DIRECT (or positive) relationship between
price and quantity supplied.
•As price increases, the quantity producers make
increases
•As price falls, the quantity producers make falls.
Why? Because, at higher prices profit seeking
firms have an incentive to produce more.
EXAMPLE: Mowing Lawns24
Example of SupplyYou own an lawn mower and you are
willing to mow lawns. How many lawns will you mow at these prices?
Price per
lawn mowed
Quantity
SuppliedSupply
Schedule
25
$1
$5
$20
$50
$100
$1000
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
Draw this large
in your notes
26
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
27
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What will cause a shift in the supply curve?TRREES!Increase in Supply—
Curve will move Right
DETERMINANTS
(SHIFTERS) OF
SUPPLY
Decrease in Supply—
Curve will move left
• More/better
technology TECHNOLOGY
• Technology breaks
down/is unavailable
• Decrease taxes
• Increase subsidies REGULATION: TAXES AND
SUBSIDIES
• Increase taxes
• Decrease subsidies
• Increase in cost of
land, labor, capital RESOURCE COST• Decrease in cost of
land, labor, capital
• Labor is better
educated/trained EDUCATION• Labor is unskilled
and uneducated
• Seller expects
market to grow in
future
EXPECTATION OF SELLER
• Seller expects
market to dwindle in
future
• Number of sellers
increases SELLERS IN THE MARKET• Number of sellers
decreases28
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
29
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if new
companies start making
cereal?
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
30
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
31
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
32
PriceQuantity
Supplied
$5 50 70
$4 40 60
$3 30 50
$2 20 40
$1 10 30
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
33
SupplyS2
PriceQuantity
Supplied
$5 50 70
$4 40 60
$3 30 50
$2 20 40
$1 10 30
Increase in SupplyPrices didn’t change but
there is MORE cereal produced
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
34
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if a drought
destroys corn and wheat
crops?
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
35
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
36
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
37
PriceQuantity
Supplied
$5 50 30
$4 40 20
$3 30 10
$2 20 1
$1 10 0
Supply
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
38
Supply
S2
PriceQuantity
Supplied
$5 50 30
$4 40 20
$3 30 10
$2 20 1
$1 10 0
Decrease in SupplyPrices didn’t change but
there is LESS cereal produced
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply
Schedule
10 20 30 40 50 60 70 80
39
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if cereal companies
find a quicker way to make
cereal?
Answer: Increase in supply
• Explanation: Technology has improved. Companies can
make more cereal more quickly, so they are willing and able
to supply more cereal (which will create a bigger profit for
them)
40
6 Shifters (Determinants) of Supply
1. Cost of resources
2. Number of Sellers
3. Technology
4. Government regulation: Taxes &
SubsidiesSubsidies
A subsidy is a government payment that supports a business or market.Subsidies cause the supply of a good to increase.
TaxesThe government can reduce the
supply of some goods by placing anexcise tax on them. An excise taxis a tax on the production or sale of
a good.
RegulationRegulation occurs when the
government steps into a market toaffect the price, quantity, or quality of
a good. Regulation usually raisescosts.
5. Education
6. Producer expectationChanges in PRICE don’t shift the curve. It only
causes movement along the curve. 41
Supply PracticeFirst, identify the determinant (shifter) then
decide if supply will increase or decrease
42
ShifterIncrease or
DecreaseLeft or Right
1
2
3
4
5
6
Supply Practice
Hamburgers1. Mad cow disease kills 20% of cows 2. Price of hamburgers increase 30%3. Government taxes burger producers4. Restaurants owners train their
employees in better methods of hamburger flipping.
5. New bun baking technology cuts production time in half
6. Minimum wage increases to $20
1. Which determinant (SHIFTER)?
2. Increase or decrease?
3. Which direction will curve shift?
43
Check your Answers:
1.Decrease in availability of
resources, decrease.
2.Price doesn’t shift curve, no
shift.
3.Government action, decrease.
4.Opportunity cost of alternative
production, decrease.
5.Technology, increase.
6.Price of resources, decrease.
44