Splash Screen

Section 1-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and quantities bought and sold.

Section 1 An Introduction to Demand Demand is the desire, willingness, and ability to buy a good or service.

Section 1 An Introduction to Demand (cont.) Demand is the desire, willingness, and ability to buy a good or service.Demand Demand schedule:Demand schedule –Lists how much of a product someone would be willing to buy at different prices

Section 1 An Introduction to Demand (cont.) Demand curve:Demand curve –Graph showing how much of a product would be bought at all possible prices

Section 1 The law of demandlaw of demand –Quantity demanded and price move in opposite directions –A common sense approach to demand An Introduction to Demand (cont.)

Section 1 Market Demand Market demand is the total demand of all consumers for a product or service.

Section 1 Market Demand (cont.) Market demand is the total demand of all consumers for a product or service.Market demand Determining market demand for an item involves research. The Law of Demand

Section 1 Market Demand (cont.) Utility:Utility –The pleasure a product provides –Not all objects have utility for all people

Section 1 Diminishing marginal utility—product pleasure decreases with increased consumptionmarginal utility Explains why prices fall as consumers buy more of an item. Market Demand (cont.)

A.A B.B Section 1 Do you think you would be willing to pay the same amount for a second copy of an item? A.Yes B.No

Section 2-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

Section 2 Changes in Demand Several different factors can cause market demand for a good or service to change.

Section 2 Changes in Demand (cont.) Demand changes over time due to many forces. Changes in demand: –More consumers enter the market –Incomes, tastes, and expectations change –Prices of related goods change –Can be shown with market demand curve

Section 2 Changes in population: –More consumers means higher demand –Fewer consumers means lower demand –Can be affected by immigration –May also be affected by birth and death rates or migration to other areas Changes in Demand (cont.)

Section 2 Changes in income: –High wages give people more money to spend –Low wages give people less money to spend Changes in Demand (cont.)

Section 2 Changes in taste: –Advertising boost –Popularity fades over time Changes in Demand (cont.)

Section 2 Changes in expectations: –Knowledge about future products –Worry about future events Changes in Demand (cont.) A Change in Demand

Section 2 Product-Related Changes: –Changes in quality –Changes in substitutessubstitutes –As price of product goes up, demand for its substitute will also go up. Changes in Demand (cont.) Change in Demand for Substitutes

Section 2 –Changes in complements (products used together)complements –As demand for one product goes up or down, so will demand for its complements. Changes in Demand (cont.) Change in quantity demanded tracks the movement along a given demand curve.

Section 2 Elasticity of Demand Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

Section 2 Elasticity of Demand (cont.) Demand elasticity is the extent to which price changes affect demand.Demand elasticity Causes of Elastic Demand: –Attractive substitutes –Ability to postpone purchase

Section 2 Elasticity of Demand (cont.) Causes of Inelastic Demand: –Few or no substitutes (e.g., medicine) Demand for luxuries more elastic than demand for necessities

Section 3-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

Section 3 An Introduction to Supply Supply is the quantities of a good or service that producers are willing to sell at all possible market prices.

Section 3 An Introduction to Supply (cont.) Supply is the quantity of goods and service for sale.Supply Supply is the opposite of demand.

Section 3 The law of supply:law of supply –As prices go up, so do supplies of goods; as prices go down, so do supplies –Law illustrated by a supply schedulesupply schedule An Introduction to Supply (cont.) The Law of Supply

A.A B.B Section 3 Do you know why diamonds, a luxury item, costs more than water, which is need for survival? A.Yes B.No

Section 3 Graphing the Supply Curve As with the law of demand, special tables and graphs can show the law of supply.

Section 3 Graphing the Supply Curve (cont.) Special graphs and tables can show the law of supply. A supply curve graphically shows the amount of a product that would be supplied at all possible prices in the market.supply curve

Section 3 Profit motive:Profit –Pushes producers to try to make money above costs –Profits can be invested many ways: Graphing the Supply Curve (cont.) Increase wages Invest in business

Section 3 Acquire more space Buy new equipment Hire more workers Keep money Graphing the Supply Curve (cont.)

Section 3 Market supply:Market supply –Slope follows individual trends –Upward slope shows that producers prefer to sell more items at higher prices –Most important influence is price Graphing the Supply Curve (cont.)

Section 3 Changes in Supply Supply increases or decreases depending on many different factors.

Section 3 Changes in Supply (cont.) Different factors cause increases and decreases in overall supply. The cost of resources: –When the price of resources falls, supply goes up. –When the price of resources goes up, supply falls. Shifts in the Supply Curve

Section 3 Productivity:Productivity –When productivity increases, costs go down. –When productivity decreases, costs go up. Changes in Supply (cont.)

Section 3 Technology:Technology –Can lower costs of production and increase supply Changes in Supply (cont.)

Section 3 Government policies: –Usually restrict supply –Taxes Changes in Supply (cont.) Higher taxes lower supply Lower taxes increase supply

Section 3 Subsidies:Subsidies –Lower production costs Changes in Supply (cont.) Expectations: –Producers may adjust supply to meet expected demand

Section 3 Number of Suppliers: –More suppliers cause more supply –Fewer suppliers cause less supply Changes in Supply (cont.)

Section 3 Elasticity of Supply Supply elasticity measures how the quantity supplied of a good or service changes in response to changes in price.

Section 3 Elasticity of Supply (cont.) Supply elasticity measures how the quantity of a good or service changes in response to price.Supply elasticity Depends on the speed at which producers can adjust supply to meet higher prices. –Inelastic supply cannot easily add more supply when prices are high. –Elastic supply can quickly increase production when prices go up.

A.A B.B C.C D.D Section 3 Which of the following supplies would be the hardest to increase quickly? A.Beef B.Gold C.Water D.Corn

Section 3-End

Section 4-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

Section 4 Markets and Prices The forces of supply and demand work together in markets to establish prices.

Section 4 Markets and Prices (cont.) Supply and demand work together to establish prices. Surplus indicates price is too high for demand.Surplus Shortage indicates price is too low for demand.Shortage The Price Adjustment Process

Section 4 The balance between supply and demand is equilibrium price.equilibrium price –Stays until supply or demand changes Markets and Prices (cont.)

Section 4 Government control over prices: –Caused by unfair balance between supply and demand –Price ceiling—maximum price for goods and servicesPrice ceiling –Price floor—minimum price that can be charged for goods and servicesPrice floor –Minimum wage is example of price floorMinimum wage Markets and Prices (cont.)

Section 4 Prices as Signals In our economy, prices are signals that help businesses and consumers make decisions.

Section 4 Prices as Signals (cont.) Prices help businesses and consumers make decisions. Advantages of prices: –They are neutral. –They are flexible. –They allow freedom of choice. –Opposite in command economy –They are familiar.

A.A B.B Section 4 Are there any advantages to the lack of choice offered in command economies? A.Yes B.No

Section 4-End

VS 1

VS-End

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

TIME Trans

DFS Trans 1

DFS Trans 2

DFS Trans 3 As the supply increases, the price decreases.

DFS Trans 4

Vocab1 demand the desire, willingness, and ability to buy a good or service

Vocab2 demand schedule a table showing quantities demanded at different possible prices

Vocab3 demand curve downward-sloping line that graphically shows the quantities demanded at each possible price

Vocab4 law of demand the concept that people are normally willing to buy less of a product if the price is high and more of it if the price is low

Vocab5 market demand the total demand of all consumers for a product or service

Vocab6 utility the amount of satisfaction one gets from a good or service

Vocab7 marginal utility additional use that is derived from each unit acquired

Vocab8 identify to find or show the identity of

Vocab9 illustrate to show or make clear by example

Vocab10 likewise similarly or in addition

Vocab11 substitute a competing product that consumers can use in place of another

Vocab12 complement product often used with another product

Vocab13 demand elasticity measure of responsiveness relating change in quantity demanded to a change in price

Vocab14 immigration the arrival of people from another region

Vocab15 phenomenon a rare or important fact or event

Vocab16 supply the amount of goods and services that producers are able and willing to sell at various prices during a specified time period

Vocab17 law of supply the principle that suppliers will normally offer more for sale at higher prices and less at lower prices

Vocab18 supply schedule table showing quantities supplied at different possible prices

Vocab19 supply curve upward-sloping line that graphically shows the quantities supplied at each possible price

Vocab20 profit the money a business receives for its products or services over and above its costs

Vocab21 market supply the total of all the supply schedules of all the businesses that provide the same good or service

Vocab22 productivity the degree to which resources are being used efficiently to produce goods and services

Vocab23 technology the methods or processes used to make goods and services

Vocab24 subsidy a government payment to an individual, business, or group in exchange for certain actions

Vocab25 supply elasticity responsiveness of quantity supplied to a change in price

Vocab26 motive something that causes a person to act

Vocab27 restrict to place limits on or keep within bounds

Vocab28 surplus situation in which quantity supplied is greater than quantity demanded; situation in which government spends less than it collects in revenues

Vocab29 shortage situation in which quantity demanded is greater than quantity supplied

Vocab30 equilibrium price the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy

Vocab31 price ceiling maximum price that can be charged for goods and services, set by the government

Vocab32 price floor minimum price that can be charged for goods and services, set by the government

Vocab33 minimum wage lowest legal wage that can be paid to most U.S. workers

Vocab34 mechanism the steps that compose a process or activity

Vocab35 purchase to buy or pay for

Vocab36 focus a central point of attention or activity

Help Click the Forward button to go to the next slide. Click the Previous button to return to the previous slide. Click the Home button to return to the Chapter Menu. Click the Transparency button from the Chapter Menu or Chapter Introduction slides to access the TIME Transparency that is relevant to this chapter. From within a section, click on this button to access the relevant Daily Focus Skills Transparency. Click the Return button in a feature to return to the main presentation. Click the Economics Online button to access online textbook features. Click the Reference Atlas button to access the Interactive Reference Atlas. Click the Exit button or press the Escape key [Esc] to end the chapter slide show. Click the Help button to access this screen. Links to Presentation Plus! features such as Graphs in Motion, Charts in Motion, and figures from your textbook are located at the bottom of relevant screens. To use this Presentation Plus! product:

End of Custom Shows This slide is intentionally blank.