Warm-up – Wed. 4/9 Easter is Sunday, 4/20!  Describe the price of Easter candy on Monday, 4/21, compared to Saturday afternoon, 4/19?  Explain the need for Easter candy on Monday 4/21, compared to Saturday afternoon, 4/19?

Supply and Demand Notes, Graphing, and Lots and Lots of Practice!!!

“What is Economics?” Reading to get a handle on this topic. It might be a quick review for you! Grab a highlighter and a pen if you don’t already have one out.

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

What do the letters mean?  “The Intersection” = Equilibrium (shows perfect supply/demand)  Q* = Quantity Demanded/Supplied (at the equilibrium price)  P* = Equilibrium Price

Definition for Supply (represents Producers)  The total amount of a good or service producers are willing and able to make at all prices at a specific point in time.

Law of Supply  States that as the price increases the quantity supplied also increases. The same applies for a decrease in price. or

DETERMINANTS – Things That Could Shift (change) the Supply of a Product  Price and availability of land, labor and/or capital (factors of production) (e.g.: OJ v. cold winter)  New technology (e.g.: cotton gin)  Number of other sellers (e.g.: grocery stores in M’town)

DETERMINANTS – Things That Could Shift (change) the Supply of a Product, cont.  Price of other goods someone could produce (e.g.: fresh fruits and/or vegetables in the summer v. winter)  Tax Policy (e.g.: GOVERNMENT if increase then overall cost goes up)

Graphing a Shift in Supply (start w/ the basic graph) S2

Graphing a Shift in Supply  The NEW supply line (S2) is called the Supply Curve.  It is a graphic representation of supply! That’s Crazy – it’s a straight line, but don’t let that throw you off! That’s Crazy – it’s a straight line, but don’t let that throw you off!

Graphing a Shift in Supply (show the new price/quantity) S2 P2 Q2 E2

Definitions for Demand (represents Consumers)  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 the price increases the quantity demanded decreases. Same applies for a decrease in price. or

Determinants - things that could shift (change) the DEMAND for a product  Tastes and fads (Q’back jerseys)  Income (BMW dealerships in area)  Number of buyers (Burger King)

Determinants - things that could shift (change) the DEMAND for a product, cont.  Future price expectations (small cars - when fuel prices go up)  Price and availability of Substitutes (“Uggs” v. “Fuggs”) Substitutes (“Uggs” v. “Fuggs”) Compliments (jam/jelly w/ PB) Compliments (jam/jelly w/ PB)

Graphing a Shift in Demand (start w/ the basic graph) D2

Graphing a Shift in Demand  The NEW Demand line is called the Demand Curve.  It is a graphic representation of demand! That’s Right Folks – it’s also a straight line! That’s Right Folks – it’s also a straight line!

Graphing a Shift in Demand (show the new price/quantity) Q2 D2 P2 E2

Closer - Wednesday, 4/9 Please note the following on your closer worksheet:  Things you learned today  Ways you can use this material in the future  Nugget of advise to future students

Let’s Practice! Now that you’ve got the idea of supply, demand and their determinants,

Introducing I R D L He will be your best friend! Always remember his name so you know whether to shift right or left (for either supply or demand)...

I R D L stands for...  Increase  Right  Decrease  Left

You always want to ask the same series of questions to help you understand the information that you will be graphing.

Questions to Prepare for Graphing  What is the market you are graphing? (good/service)  Which determinant has changed?  Does it affect supply or demand?  Does supply/demand increase or decrease?  Does the supply/demand curve shift right or left?  Note that questions #2 and #3 can be switched!

Let’s Graph! 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  Which determinant has changed?  Price and Availability of Capital  Does it affect supply or demand?  Supply  Does supply increase or decrease?  Increase ↑  Does the supply curve shift to the right or left?  Right →

Supply of computers increases because more factories are built. S2 P2 Q2 E2

Doctors announce benefits of eating ice cream daily Try Another

Doctors announce the benefits of eating ice cream daily  What is the market you are graphing?  Ice Cream  Which determinant has changed?  Taste and Fads  Does it affect supply or demand?  Demand  Does supply increase or decrease?  Increase ↑  Does the supply curve shift to the right or left?  Right →

Demand for ice cream increases for health reasons Q2 D2 P2 E2

Car Manufacturer Announces Plans for SUV Price Increase in Two Months Here’s a Tricky One

Don’t forget to ask the questions...  What is the market you are graphing?  Which determinant has changed?  Does it affect supply or demand?  Does supply/demand increase or decrease?  Does the curve shift to the right or left?

Demand for SUVs NOW! Q2 D2 P2 E2

Always read the headline for what it is right now! Try not to read into it too much! Keep it simple!

More Supply/Demand Practice Graphing

Closer - Wednesday, 4/9 Please note the following on your closer worksheet:  Things you learned today  Ways you can use this material in the future  Nugget of advise to future students

Toyota unveils new car that gets 97 mpg!

Don’t forget to ask the questions! What is the market you are graphing? Which determinant has changed? Does it affect supply or demand? Does supply/demand increase or decrease? Does the supply/demand curve shift to the right or left?

Demand increases for Toyotas with great gas mileage P2 Q2 D2

Protected Owls Discovered in Lumber Forest! Companies told to discontinue logging.

Don’t forget to ask the questions! What is the market you are graphing? Does it deal with Supply or Demand? Does supply increase or decrease? Does the supply curve shift to the right or left?

Supply of lumber (logging) decreases due to protection of owls S2 P2 Q2