Demand & Supply

1. Demand & Supply Agribusiness Management Mr. Dieckhoff

2. Which team mascot is this:

3. Which team mascot is this:

4. What do they have in common? At first you may think Chicago, but there is more….. Let’s dive deeper……………

5. What team mascot is this:

6. What team mascot is this…..

7. What team mascot is this….

8. What mascot is this….

9. Now, can you guess what do they have in common? They have to do with markets and Economics!!!

10. Bulls vs. Bears • Bulls – think market prices are going • Bears – think market prices are going down

11. Which one is better??? • Bulls – prices going up usually means wages increase, stocks do better….but items are more expensive • Bears – prices going down mean cheaper products, but stagnant wages and poor performing stocks • You have to have both forces working in a market, neither is better • What causes the market to go up or go down?

12. Section 1 - Demand Heck

13. What is demand….. • The quantity of a particular good or service that a consumer will want to purchase at a given price

14. How can you determine Total Revenue from Demand? • Revenue is calculated by Price x Quantity • How much revenue at A? • How much revenue at B? • How much revenue at C?

15. Why does the Demand Curve slope downward to the right? Diminishing = down Marginal = change Utility = satisfaction • Law of Diminishing Marginal Utility

16. What causes a movement along a demand curve? • Change in Price or Change in Quantity • Does this mean Demand has changed? • NO, NO, NO, NO, NO • We did not cause people to become more or less satisfied with our product

17. How do we change demand? There are only 5 factors which change demand. • Price of related goods • Substitutes – goods used instead of another good • Honey & Jelly or Corn & Grain Sorghum • Complements – goods purchased together with another good • Oil & Oil Filter or Vaccine & Syringe • Income • Number of buyers • Taste / Utility • Expectations

18. What direction would the demand curve move for a decrease in demand?

19. What direction would the demand curve move for an increase in demand?

20. What is the difference between a change in quantity demand and a change in demand? • Change in Quantity Demand is a movement along the same demand curve • Change in Demand causes us to move the demand curve to the right or left

21. Market for pillows when the price of bed sheets increases • Pillows and Bed Sheets are complements, therefore when the price of bed sheets increases, people will buy fewer bed sheets, thus buy fewer pillows

22. Demand for corn stoves when the price of propane decreases • Burning corn is a substitute for burning propane. Thus is propane prices decrease, people will burn propane and not corn in corn stoves

23. Demand for school lunch if 100 more people enrolled at your high school • More people eating means more buyers, thus an increase in demand

24. Demand for gasoline if the newspaper said the Futures Price of a Barrel of Oil Increased • Expectations of a future price increase will cause people to demand more gasoline today.

25. Demand for cell phones if the major employer in town cuts wages by $0.50 / hour • Since digital cameras are a want, if people earn less income, the demand will decrease

26. Demand for Drew Lock jersey following a Mizzou National Championship. • Since everyone would have a high satisfaction (utility) level for the Mizzou Tigers if they won….we would increase our demand for jerseys.

27. What is price elasticity of demand? • How much quantity demand changes with a change in price • Gas – even if the prices jumps by 10%, we buy about the same amount • Inelastic • Ice Cream – if the price jumps by 10%, we buy about 10% less • Unit Elastic • Hamburger – if the price jumps by 10%, we buy a lot less • Elastic

28. Elasticity of Demand Ep = % Change in Quantity Demanded % Change in price

29. Elasticity of Demand P More elastic Hamburger All Beef All Meat All Food Q

30. Elasticity of Demand Unit Elastic Demand Curve Inelastic Demand Curve Elastic Demand Curve A price increase will decrease total revenue A price increase will increase Total Revenue A price increase will not change Total Revenue

31. Section 2 - Supply

32. What is Supply? • The total amount of a good or service available for purchase

33. Why does the Supply Curve Slope Upward to the Right • Increasing Opportunity Cost

34. What causes a movement along a supply curve? • Change in Price or Change in Quantity • Does this mean Supply has changed? • NO, NO, NO, NO, NO • We did not cause producers to change long run plans

35. How do we change supply? There are only 5 factors which change supply. • Input Prices (S) • Price of Related Goods and Services • Substitutes • Complements • Expectations • Number of Sellers • Technology

36. What direction would the supply curve move for a decrease in supply?

37. What direction would the supply curve move for an increase in supply?

38. What direction would the supply curve move if an increase in demand occurred? • Trick Question!!!!! • A change in demand (or supply) will not cause a change in supply (or demand)

39. What is the difference between a change in quantity supplied and a change in supply? • Change in Quantity Supplied is a movement along the same supply curve • Change in Supply causes us to move the supply curve to the right or left

40. Supply of Cattle if the government requires electronic ID chips which a farmer must purchase

41. Supply of hot dogs when the price of hot dog buns decreases

42. Supply of soybeans when the March Soybean Futures Contract increases by 34%

43. Supply of carrots if Dole Foods opens a major carrot farm in Texas

44. Supply for pork chops if a new processing technology makes processing pork more efficient

45. Supply of farm machinery if the government creates a tax on all machinery and equipment

46. Section 3 - Markets

48. What is a market? • Brining together of buyers and sellers

49. Demand & Supply Market Equilibrium or Clearing Price

50. Both Consumer & Producer Surplus