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Demand and Supply

Demand and Supply. Revisited Along with elasticity, shifters, equilibrium & disequilibrium. The Law of Demand. P. QD. As the Price for a good or service increases, the Quantity Demanded Decreases Example Candy Auction. All of the Prices paired with the Quantities Demanded = Demand

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Demand and Supply

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  1. Demand and Supply Revisited Along with elasticity, shifters, equilibrium & disequilibrium

  2. The Law of Demand P QD

  3. As the Price for a good or service increases, the Quantity Demanded Decreases Example Candy Auction • All of the Prices paired with the Quantities Demanded = Demand • Price can only indicate a change in the quantity demanded– It cannot change Demand • Only Six (6)things can change Demand • ▲ Income, ▲Population, ▲Tastes & Preferences • ▲Consumer Expectations, ▲Price of Substitutes • ▲Price of Complements

  4. What could change this graph? Change in Demand

  5. Elastic • Inelastic • How sensitive to a change in price is the change in the quantity demanded? Elasticity of Demand: What Makes the Slope of the Line change?

  6. The Law of Supply P QS

  7. As the price for a good or service increases, the quantity supplied also increases P Q • All of the Prices paired with the Quantities Supplied = Supply • Price can only indicate a change in the quantity supplied– It cannot change Supply • Only Six (6) things can change Supply • ▲ Cost of Inputs, ▲# of Producers, • ▲Producer Expectations, ▲Technology • ▲Government Policy, ▲Natural Events/Disasters

  8. How do you Know when the Price is Right? • Equilibrium QD & QS Intersect at the Same Price  . Equilibrium point

  9. Price Controls =Government Involvement • Price Floor = price set above Equilibrium Surplus Shortage Price Ceiling = Price set below Equilibrium

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