250 likes | 319 Views
Supply and Demand. Graphing, Notes, and Lots and Lots of Practice!!!. The Basic Graph (aka “The Starting Point”). What do the letters mean?. X axis = Q = Quantity Y axis = P = Price D = Demand S = Supply. The Basic Graph (aka “The Starting Point”). Equilibrium.
E N D
Supply and Demand Graphing, Notes, and Lots and Lots of Practice!!!
What do the letters mean? X axis = Q = Quantity Y axis = P = Price D = Demand S = Supply
The Basic Graph (aka “The Starting Point”) Equilibrium
What do the letters mean? “The Intersection” = Equilibrium (shows perfect supply/demand) P* = Equilibrium Price Q* = Quantity Demanded/Supplied (at the equilibrium price)
Definition for Supply • The total amount of a good or service producers are willing and able to make at all prices at a specific point in time.
or Law of Supply • States that as price increases (or decreases) the quantity supplied also increases (or decreases).
Things (determinants that could shift (change) the SUPPLY of a product • Price and availability of land, labor and capital (OJ v. cold winter) • New technology (cotton gin) • Number of other sellers (grocery stores in M’town)
Things (determinants that could shift (change) the SUPPLY of a product, cont. • Price of other goods I could produce (fresh fruits/vegetables in summer v. winter) • Taxes (if they increase overall cost goes up too)
S2 S2 Graphing a Shift in Supply(start w/ the basic graph)
Graphing a Shift in Supply • The NEW supply line (S2) is called the Supply Curve. That’s Crazy – it’s a straight line! (don’t let that throw you off)
S2 P2 Q2 Graphing a Shift in Supply (show the new price/quantity)
Definitions for Demand • The total amount consumers are willing and able to buy at all prices at a specific point in time.
Law of Demand • States that as price increases (or decreases) the quantity demanded decreases (or increases). or
Things (determinants) that could shift (change) the DEMAND for a product • Tastes and fads (McNabb shirts) • Income (Prada, Coach, BMW) • Number of buyers (Burger King)
Things (determinants) that could shift (change) the DEMAND for a product, cont. • Future price expectations (SUVs when gas increases) • Price and availability of • Substitutes (Uggs v. no name) • Compliments (jam/jelly w/ PB)
D2 D2 Graphing a Shift in Demand(start w/ the basic graph)
Graphing a Shift in Demand • The NEW Demand line is called the Demand Curve. That’s Right Folks – it’s also a straight line!
P2 D2 Graphing a Shift in Demand (show the new price/quantity) Q2
I R D L Always remember it so you know whether to shift right or left(for either supply or demand). . .
I R D L stands for . . . • Increase • Right • Decrease • Left
Let’s Try It! Imagine you are reading a newspaper and come across the following headlines . . .
Two Major Computer Manufacturers Build Five New Factories • What is the market you are graphing? • Computers • Does it deal with Supply or Demand? • Supply • Does supply increase or decrease? • Increase • Does the supply curve shift to the right or left? • Right
Doctors announce benefits of eating ice cream Try Another
Car Manufacturer Announces Plans for SUV Price Increase in Two Months Here’s a Tricky One