Economics – Day 5 9/16/14

Do Now: Reading Quiz Define the following terms complements, inferior good, normal good, substitutes. The text lists six main factors that shift the demand curve. List 3. The text lists six main factors that shift the supply curve. List 3. If the supply of a good increases which way does the supply curve shift? If the demand of a good decreases which way does the demand curve shift?

Review from Last Class Complements – two goods that go together. When the price of one goes up the demand of the other goes down. i.e. Hot Dogs and Mustard, Gas and Cars Inferior Good – a good that people demand less of when their income increases. i.e. Low quality products (disposable razors example) Normal Good – a good that people demand more of when their income increases. New clothing, new car, new phone, new computer, new video game Substitutes – two goods that compete with each other. When the price of one good goes up, the quantity demanded of the other also goes up. i.e. coke and pepsi

Factors that Shift Demand Consumer Income Employment and Unemployment rates Price of Substitute Price of Complement Population (of buyers) Market Size Tastes Future Price Expectations What buyers expect the future prices of the good will be

How to Illustrate the Shift in Demand When demand increases, at any given price people want to buy more of the good. The demand curve shifts outward and to the right When demand decreases, at any given price people want to buy less of the good. The demand curve shifts inward to the left

Factors that Shift Supply Technology Price of Inputs (inputs are things used to produce the goods) Number of Firms Price of Substitute Products Price of Joint Products Future Price Expectations

How to Illustrate the Shift in Supply An event that increases supply causes the supply curve to shift outward and to the right An event that decreases supply causes the supply curve to shift inward and to the left

Would the demand curve or supply curve shift? Market Event Would the demand curve or supply curve shift? Would the curve shift to the right or left? wheat A drought destroys much of the crop. Supply Left redwood lumber Environmentalists urge consumers to boycott redwood products.   cigars A new study shows that smoking cigars results in lots of wrinkles. butter The price of margarine goes up. paper The price of wood pulp rises. Hula hoops Brad Pitt confides to People magazine that "he gets a big kick out of his hula hoop." yachts The average price of stocks falls by over 20% between now and the end of the year. gasoline Large sports-utility vehicles (like Suburbans and Expeditions) become more popular. umbrellas Heavy rain is forecast. tofu E. Coli bacteria is found in another meat plant. Two oil supertankers collide. hamburger The price of hamburger rises. oranges There's an early frost which destroys much of the crop. apples A new pesticide is developed which controls tent caterpillars. grapes The National Marines Fisheries Service bans pesticide spraying within 1,000 feet of waterways containing coho salmon. wine The average wage of grape harvesters rises by 10%. U.S. cars The U.S. imposes a tariff on Japanese car imports. hospital beds Scientists discover a pill that cures cancer. cement A 7.9 earthquake hits San Francisco. Video rentals The price of getting cable TV goes up. windshields A new law is passed requiring gravel trucks to cover their loads with tarps. Taxi service Local subway workers go on strike Bike helmets The price of bicycles goes down Lucerne milk The price of Safeway milk goes down. jellybeans The price of jellybeans goes up. Oreo cookies The price of milk increases. Burger King whoppers McDonald's lowers the price of Big Macs. Hot dogs 60 Minutes does an expose called "The Truth about Hot Dogs." Mad Cow Disease wipes out a lot of dairy cows. candles An electric company official announces that a computer bug will likely result in power outages.

Do Later: Homework Find a current events article that talks about supply and demand. Come to class with a ½ page summary on the article and be prepared to discuss in class.