Obj. 7.7 Supply, Demand & Price

Key Questions:- How does Price affect supply and demand Key Questions:- How does Price affect supply and demand? How does supply and demand affect price?

WHAT to produce and HOW MUCH to produce is determined by supply and demand.

The Law of Supply

Supply is the amount of a product that producers are willing to make at different prices.

Law of Supply When the price is high, producers are willing to supply more product WHY??

When the price is low, producers make less $ and supply less Law of Supply When the price is low, producers make less $ and supply less WHY??

Yo-Yo’s Notice as price increases, so does supply Price (consumer is willing to pay) Supply (amount producer is willing to make) $1.00 10 $2.00 40 $3.00 70 $4.00 140 Notice as price increases, so does supply

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The Law of Demand

Demand is the amount of a G/S consumers are willing to buy at different prices.

Law of Demand When the price is low, more consumers want to buy the product, the demand is high

Law of Demand When the price is high, fewer consumers are willing to buy the product, demand is low

Fleischer’s Yo-Yo’s Notice as price increases, Demand decreases Price (consumer is willing to pay) Quantity Demanded $1.00 100 $2.00 90 $3.00 70 $4.00 40 Notice as price increases, Demand decreases

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Together supply and demand determine the best price of a product

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Market Price The market price is the price at which buyers and sellers agree to trade. The market price will be where the demand and supply is equal

market price 140

How do changes in supply & demand effect price?

prices will be LOW (S↑D↓=P↓) When supply is high and demand is low there will be a SURPLUS of the product Producers will want to sell as much of the product as possible to get rid of the surplus prices will be LOW (S↑D↓=P↓)

price will be HIGH (S↓D↑=P↑) When supply is low and demand is high there will be a shortage of the product Because the product is hard to get, consumers will be willing to pay more price will be HIGH (S↓D↑=P↑)