Economics Supply and Demand

Supply and Demand Demand curve –When the price of a product is high, consumers don’t buy much of it –When the price of a product drops, consumers are willing to buy more –Thus the demand curve slopes downward Simple_supply_and_demand.png

Supply and Demand Supply curve –If a product sells at a low price, producers make little of it –As the price rises, producers are willing to make more of the product –The supply curve thus slopes upward Simple_supply_and_demand.png

Supply and Demand Price reaches an equilibrium at the intersection of the supply curve and the demand curve. If price is higher than this point: –Producers will want to produce more –Customers will want to pay less –Thus price drops back to equilibrium Simple_supply_and_demand.png

Supply and Demand Consumers are pursuing their own best interest Producers are pursuing their own best interest “Invisible Hand” matches supply with demand –Adam Smith Simple_supply_and_demand.png

Shift in Demand Curve Demand curve may shift to the left –Not willing to pay as much –Thus price drops –Due to drop in income Demand curve may shift to the right –willing to pay more for product –Due to: Increased population Increased income Changes in taste Demand curve shift to the left

Shift in Supply Curve If it becomes easier to produce a product, supply curve will shift to right –More farmland –More children for labor –Fertilizer available –Water available –Technology available Price drops

Demand and Supply Questions: 1. What will suppliers do if the price is high? 2. What will consumers do when the price is low? 3. What is it called when the supply and demand curve intersect? 4. What is Adam Smith talking about when he mentions the “Invisible Hand?” 5. When will the demand curve shift to the left? 6. When will the demand curve shift to the right? 7. When will the supply curve shift to the left? 8. When will the supply curve shift to the right?

Quiz Information 1. Who controls supply? 2. What is the United States standard of living? Explain. 3. What is productivity growth? 4. What is inflation? 5. How have technological innovations increased productivity? Example? 6. What is included in a country’s GDP? 7. How does increased productivity increase GDP? 8. What is a country’s standard of living? 9. How does productivity increase a country’s standard of living? 10. When price goes up, then demand goes. 11. When price goes down, then demand goes. 12. When price goes up, then supply goes. 13. When price goes down, then supply goes. 14. The demand curve slopes. 15. The supply curve slopes. ** Also vocabulary from Monday**