D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2

D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2 More income results in more demand for new cars; New Cars Less income results in less demand for new cars.

D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2 More demand for both new and used cars New Cars Used Cars 1 billion This is what we told 1 billion Chinesenew potential Chinese, as new potential consumers consumers, when we opened trade relations trade relations with them in the 70s.

D1 D1 D1 D1 D2 D2 D2 D2 P QD 1 QD 2 coming out of recession Let’s say that we are coming out of recession & consumers Positive future income feel secure about their jobs. [ Positive future income ]

D1 D1 D1 D1 D2D2D2D2 P QD 1 QD 2 going into a recession Let’s say that we are going into a recession and consumers Negative future income don’t feel secure about their jobs. [ Negative future income]

Complement Substitute Milk Cereal Pop Tarts D1D1D1D1 D2D2D2D2 P P1P1P1P1 QD 1 P2P2 D1D1D1D1 D2D2D2D2 D P QD 2

1. Resource Costs [wages & raw materials ] Wages Raw Materials S If resource costs Decrease, supply Increases [making more $] If resource costs Increase, supply Decreases [making less $] S S P

P1 QS1 Broccoli “Substitutes in production” Whoa, the price of Broccoli went up! Got to plant more of that now! S Corn S1S1S1S1 P S2S2S2S2 Producers want to produce more of the good that they can charge a higher price for. P2 QS2

S Because cows produce more milk, farmers don’t have to have as many cows. [ saves $ ] S P We love these cow waterbeds because we get better blood flow and can produce 30% more milk. Supply curve “udderly” moves “udderly” to the right. Less skin abrasions so happier cows produce more milk.

NFL S1S1P Q $50 $50 Supply of FB games increased when the AFL was formed. S2S2S2S2 QSQS AFL in 2001 (Arena Football League) A new league is created so there are more games! Supply of FB games each week 8 new teams

expectfuture oilprices to decline If oil p roducers expect future oil prices to decline, they will (increase/decrease) current production. S1S1S1S1 Oil Prices expected to decrease P S2S2S2S2 expect future oil prices to increase If oil p roducers expect future oil prices to increase, they will (increase/decrease) current production. S2S2S2S2 Oil Prices expected to increase