Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Individual Markets: Demand & Supply

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages LAW OF DEMAND As Price Falls… …Quantity Demanded Rises As Price Rises… …Quantity Demanded Falls An inverse relationship exists between price and quantity demanded

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE Income Effect As prices fall, people have relatively more income

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE Income Effect Substitution Effect As prices rise, people will purchase substitute goods

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility As a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility Income Effect Substitution Effect LAW OF DEMAND Demand Curve - Graphically

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages GRAPHING DEMAND P Q o $ PQDQD $ Price of Corn Quantity of Corn CORN Plot the Points

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 55 P Q o $ PQDQD $ Price of Corn Quantity of Corn CORN Plot the Points GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 35 P Q o $ PQDQD $ Price of Corn Quantity of Corn CORN Plot the Points GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ Price of Corn Quantity of Corn CORN Plot the Points GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ Price of Corn Quantity of Corn CORN Plot the Points GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ D Price of Corn Quantity of Corn CORN Connect the Points GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ D Price of Corn Quantity of Corn CORN What if Demand Increases? GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ D Price of Corn Quantity of Corn CORN D’ Increase in Demand Increase in Quantity Demanded GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ D Price of Corn Quantity of Corn CORN What if Demand Decreases? GRAPHING DEMAND

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ PQDQD $ D Price of Corn Quantity of Corn CORN D’ Decrease in Demand Decrease in Quantity Demanded GRAPHING DEMAND

Demand Changes in Demand Supply Changes in Supply Equilibrium Surpluses & Shortages Welfare Economics DETERMINANTS OF DEMAND Tastes (Preferences) Prices of Related Goods – Substitutes & Complements Income – Normal (Superior) & Inferior Goods Number of Buyers Expectations

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages LAW OF SUPPLY As Price Rises… …Quantity Supplied Rises As Price Falls… …Quantity Supplied Falls A direct relationship exists between price and quantity supplied

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 5 P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 35 P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN Connect the Points GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN What if Supply Increases? GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $ Price of Corn Quantity of Corn $ PQSQS CORN S’ Increase in Supply Increase in Quantity Supplied GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN What if Supply Decreases? GRAPHING SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $ $ PQSQS Price of Corn Quantity of Corn CORN S’ Decrease in Supply Decrease in Quantity Supplied GRAPHING SUPPLY

Demand Changes in Demand Supply Changes in Supply Equilibrium Surpluses & Shortages Welfare Economics DETERMINANTS OF SUPPLY Resource Prices Prices of Other Goods Technology Taxes & Subsidies Expectations Number of Sellers

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages DETERMINANTS OF SUPPLY Resource Prices Technology Taxes & Subsidies Prices of Other Goods Price Expectations Number of Sellers Combining with Demand

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 7 S P Q o $ PQDQD $ ,000 4,000 7,000 11,000 16,000 $ ,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Market Clearing Equilibrium MARKET DEMAND & SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 7 S P Q o $ PQDQD $ ,000 4,000 7,000 11,000 16,000 $ ,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Surplus At a $4 price more is being supplied than demanded MARKET DEMAND & SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 11 7 S P Q o $ PQDQD $ ,000 4,000 7,000 11,000 16,000 $ ,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET At a $2 price more is being demanded than supplied Shortage MARKET DEMAND & SUPPLY

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 11 7 S P Q o $ PQDQD $ ,000 4,000 7,000 11,000 16,000 $ ,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Shortage MARKET DEMAND & SUPPLY Surplus

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages MARKET EQUILIBRIUM Equilibrium Price & Quantity Free Markets Move Towards Equilibrium Changes in Demand Changes in Quantity Demanded Changes in Supply Changes in Quantity Supplied

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Simple Cases Supply Increases –What happens to Equilibrium Price and Quantity Supply Decreases –What happens to Equilibrium Price and Quantity

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Simple Cases Demand Increases –What happens to Equilibrium Price and Quantity Demand Decreases –What happens to Equilibrium Price and Quantity

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Complex Cases Supply Increases; Demand Decreases Supply Decreases; Demand Increases Multiple Shifts…

Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Complex Cases Supply Increases; Demand Increases Supply Decreases; Demand Decreases Multiple Shifts…