Today’s Objectives – Day 10

1. Today’s Objectives – Day 10 • Review test grades and questions • Begin Chapter 5 – Supply and Demand • Supply and Demand activities • You will… • Understand what demand and supply are • How to chart them and understand charts • What affects each of them and how

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3. Understanding Demand Principles • Demand is - the amount of a good or service that consumers are willing and able to buy at all prices in a given period • In order to be part of the demand of a product, two things must be true • Must be willing to purchase the product • Must be able to afford the product • Law of Demand – as prices increase, the quantity demanded decreases.

4. Demand and Price Interactions • Demand can be influenced by price • Affects the willingness to purchase a product at different prices • Using this gives us a Demand Curve • Shows how much people will/would buy at specific prices

5. What Causes Changes in Demand? • Demand can be affected by many causes • Can affect personal and market demand • Personal demand affects just one person • Market Demand is the demand of the whole

6. What Causes Changes in Demand? • Things that can affect demand are… • Known as demand shifters • Changes in people’s personal income • Changes in preferences of products • Changes in prices of products • Can be affected by complimentary products or substitute products • Complimentary – product used w another good • Substitute – different product that does the same job • Changes in the number of consumers in market • Changes in expectations of the buyers

7. Graphing Demand Curve • Take the information below to make a demand curve on a graph.

8. Market Demand Curve 1.50 1.25 1.00 .75 .50 .25 5 10 15 20 25 30 35 40 45 50

9. Graphing the Changes in Demand • Changes in Demand – happen when quantities change at ALL prices • Demand can increase or decrease • Always caused by outside factors • Decrease in demand shifts demand curve LEFT • Increase in demand shifts demand curve RIGHT • When curve moves it is referred to as a demand shift • Price does NOT affect this, other factors do

10. Change in Consumers 1.50 1.25 1.00 .75 .50 New consumer increases demand .25 5 10 15 20 25 30 35 40 45 50

11. Change in Consumers 1.50 1.25 1.00 .75 .50 New income for Joe #1 increases demand .25 5 10 15 20 25 30 35 40 45 50

12. Other Affects to the Demand Curve • People find Costco more appealing than Giant… • What is the affect of the demand curve for products at • Giant? • Costco? • What demand shifter created this? • Starbucks raises its prices due to a poor coffee bean season this year… • What is the affect of the demand curve for products at • Giant? • Costco? • What demand shifter created this? • You decide to start drinking Caribou Coffee instead of Starbucks due to the price rise… • What is the affect of the demand curve for products at • Giant? • Costco? • What demand shifter created this?

13. Exit Ticket – Demand Worksheet • Use the information from your notes to graph the following information and show the correct shifts. • This should be turned in at the end of the block (if time allows) – if no time allows it is HOMEWORK!!

14. What is Supply? • Supply – amount of all producers willing to sell at a specific price during a specific time • Law of Supply - Sellers want to sell at higher prices, and will sell less at lower prices. • While buyers want more at a lower price, sellers do NOT want to sell MORE at a lower price.

15. Supply Schedule and Supply Curve • Just like demand, we use a supply curve to show what people are willing to sell • Supply curve – shows amount at specific prices • Market Supply – sum of all suppliers at a price Chart shows what Jasmine is willing to make/supply at different price levels

16. Graph this Market Supply Add up all 3 shops and create a graph based on the final numbers

17. Graph should take the sum of all 3 taco places and place them at the specific prices they want to sell at

18. What Causes Supply to Change? • Supply shifters change the supply curve • Multiple reasons for changes in supply • Very similar to changes in demand • Shifts caused by many things • decrease in supply shifts the curve left • increase in supply increases supply to the right

19. What are the Supply Shifters • Changes in the cost of inputs • when factors of production price increases/decreases, supply curves will shift • Changes in the number of suppliers • the more people there are the higher the supply numbers and visa versa • Changes in profit opportunities • If money can be made with other products, companies may change

20. What are the Supply Shifters • Changes in technology - can increase supply by increasing productivity • Changes in producer expectations • If market price is low, producers may limit the supply to get a higher price • Happens with US farmers. Govt pays them NOT to produce goods; keeps prices higher • Changes in government policy • Can affect in two different ways • Subsidies – cash payments to help producers • Excise taxes – taxes put on goods

21. When We Mix Supply & Demand • Equilibrium – point where quantity supplied meets the quantity demanded • No wasted product and no additional desire • Equilibrium Price – price in which equilibrium is achieved • Also known as “Market Clearing Price”

22. Elasticity of Supply and Demand • Elasticity – how much stretch the QUANTITYdemanded or supplied has when price changes • degree of elasticity tell economists how responsive consumers are to changes in price • Inelastic – consumer response is slight or not at all • usually this way with necessity products • Elastic – consumer response to price change is large; would buy something else if price rose

23. Elasticity of Supply and Demand • Demand Elasticity – • How the QTY demanded changes with price • Elastic goods show a large change in quantity • Inelastic goods show little charge • Supply Elasticity – • How the QTY of supplied goods changes with price • Elastic goods can be produced quickly • Inelastic goods take more time

24. Graphing Demand Elasticity • Graphs can also show the elasticity of goods • Steep slopes show inelasticity • Shallow slopes show elasticity • Found by graphing two points • Graph the initial price and quantity and the NEW price and quantity

25. Factors that Affect Demand Elasticity • Availability of substitutes • more substitute products means more elasticity • Price vs. Income • increases in price may/may not affect you because of your income • Necessity v. Luxury • necessities usually considered inelastic • Time • it takes time for adjustments that can change elasticity rates

26. Graphing Supply Elasticity • Graphs can also show the elasticity of goods • Steep slopes show inelasticity • Shallow slopes show elasticity • Found by graphing two points • Graph the initial price and quantity and the NEW price and quantity

27. Factors that Affect Supply Elasticity • Availability of inputs • Inability to get goods can slow production • Mobility of inputs • how easily products can be moved to where they are needed for production • Storage capacity • ability to store goods for production • Time • additional time allows supply chain to have time to get to producers