SUPPLY AND DEMAND WHAT IS IT?

DEMAND DEMAND-willingness of consumers to by goods and services (Demand always deals with consumers) LAW OF DEMAND-consumers are more willing to buy more goods at lower prices than they are at higher prices. THINK about it, to say you demand something means you want it and as a consumer you want to get more for your money. Ex. Which would you be more willing to buy: 1 candy bar for $1.00 or 2 candy bars for $1.15

WHAT DETERMINES YOUR DEMAND FOR A PRODUCT? 1. Taste/Trends-What you like. Advertising has a lot to do with this.

Income Income-The amount of money you have available to spend.

WHAT DETERMINES YOUR DEMAND FOR A PRODUCT? Expectations for the future- What do you think might happen in the future. If the Farmer’s Almanac forecasts a cold winter people may demand more snow tires and rock salt

WHAT DETERMINES YOUR DEMAND FOR A PRODUCT? 4. COMPLIMENTARY GOOD-a good you use along with another good. For example, bullets and a gun, camera and memory card. THINK ABOUT IT-If the government says guns are illegal, will you still demand bullets?

WHAT DETERMINES YOUR DEMAND FOR A PRODUCT? 5. SUBSTITUTE GOODS-a good you use in place of another good. For example, butter for margarine, Coke for Pepsi, white bread for wheat bread. THINK ABOUT IT-If one good becomes too expensive, you will replace it with something else.

SUPPLY SUPPLY-a business willingness to sell (supply) products to be sold. LAW OF SUPPLY-businesses will supply more goods at higher prices than they will at lower prices. THINK ABOUT IT-If you own a business wouldn’t you sell more products if people would pay higher prices for them.

Factors that effect a businesses willingness to supply a product. 1. Cost of production-If it is more expensive to make the product, they won’t make as many. 2. Changes in Taxes and Government Policies-If the government increases/decreases taxes, it will change a businesses supply.

Factors that effect a businesses willingness to supply a product. 3. Technology-if technology improves businesses can make goods cheaper. 4. Expectations for the future: What does a business think will happen in the future (if new technology is coming out, do you keep making new materials?

SURPLUS AND SHORTAGE SURPLUS-when a business makes too much of a product Prices go down, b/c businesses want to get rid of their extra supply SUPPLY is UP, PRICES GO DOWN

SHORTAGE When a business doesn’t have enough supply to fulfill consumers demand When DEMAND is HIGH, prices go UP b/c people want the supply and will pay more for it.