Demand and Supply Demand: The various amounts of a good which people are willing and able to buy at different prices when all other relevant things are held constant. Demand: The various amounts of a good which people are willing and able to buy at different prices when all other relevant things are held constant. Who wants a yacht? Who wants a yacht? Ceteris Paribus Ceteris Paribus "with other things the same." "all other things being equal."

Demand Schedule for Corn Price per Bushel Quantity Demanded Per Week $510 $420 $335 $255 $180

Law of demand Quantity demanded of a good or service varies inversely with its price. Quantity demanded of a good or service varies inversely with its price. Consumers will want to buy more at a lower price and less at a higher price. Consumers will want to buy more at a lower price and less at a higher price.

What causes the demand for a product to change? Price will cause a change in behavior according to the law of demand Price will cause a change in behavior according to the law of demand A change in price will result in a movement along the demand curve A change in price will result in a movement along the demand curve This is called a change in quantity demanded This is called a change in quantity demanded

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What else can change our demand for a good? Everything other than price, will result in a change in demand or a shift in demand Everything other than price, will result in a change in demand or a shift in demand Example: Example: Mr. Kohn gives Mr. Unwin a raiseMr. Kohn gives Mr. Unwin a raise OrOr Mr. Kohn fires Mr. UnwinMr. Kohn fires Mr. Unwin Price has not changed, but other conditions have caused me to demand fewer goods Price has not changed, but other conditions have caused me to demand fewer goods

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Determinants that shift demand 1. The number of consumers 2. A change in the price of a complimentary good

Determinants that shift demand 3. A change in the price of a substitute 4. A change in consumer income

Determinants that shift demand 5. A change in expectations 6. A change in consumer taste Advertising Popularity seasonal effect news reports

Supply The amounts of a good or service that sellers will offer at various prices when all other relevant things are held constant (ceteris paribus) The amounts of a good or service that sellers will offer at various prices when all other relevant things are held constant (ceteris paribus)

Supply Schedule for Corn Price per Bushel Quantity Supplied Per Week $560 $450 $335 $220 $15

Law of Supply As prices rise, the quantity supplied rises; as prices fall, the quantity supplied falls As prices rise, the quantity supplied rises; as prices fall, the quantity supplied falls Producers want to sell more at higher prices and less at lower prices Producers want to sell more at higher prices and less at lower prices Profit per unit of production Profit per unit of production

Effect of price on supply Changes in price result in a movement along the supply curve Changes in price result in a movement along the supply curve We call this a change in quantity supplied We call this a change in quantity supplied Profit per unit of production Profit per unit of production

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Determinants that shift supply Anything, other than price that causes suppliers to provide more or less of their product results in a: Anything, other than price that causes suppliers to provide more or less of their product results in a: Change in supply Shift in supply Profit per unit of production Profit per unit of production

Determinants of Supply 1. Number of Suppliers 2. Price of inputs (factors of production)

Determinants of Supply 3. Prices of related goods produced

Determinants of Supply 4. Technology Taig CNC Mill Taig CNC Mill 4. Expectations

Determinants of Supply 6. Taxes and Subsidies 7. Government regulation