1 Supply and Demand. 2 The Laws of Supply and Demand When people's actions are based on self- interest, people respond to incentives:self- interest When.

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Presentation transcript:

1 Supply and Demand

2 The Laws of Supply and Demand When people's actions are based on self- interest, people respond to incentives:self- interest When the cost of an activity is raised people do less of the activity; When the benefit of an activity is reduced people do less of the activity.

3 The Law of Demand As the price gets higher, people want less of a particular product Quantity Price $40 $30 $20 $

4 Demand Curves Can Change Fashions, technology, new information, etc. can all shift the demand curve. Quantity Price $40 $30 $20 $

5 The Supply Curve As the price gets higher, suppliers are willing to supply more of a product Price Quantity $40 $30 $20 $

6 Equilibrium This represents what the price is at the moment in the marketplace. Price Quantity $40 $30 $20 $ Supply Demand

7 Examples of Supply and Demand Housing Gasoline Orange juice after a freeze in Florida Import quotas (affecting supply)

8 What if...?...peanut butter was discovered to be a cure for cancer?...a cheap, environmentally-friendly source of automobile fuel was discovered?... eating large quantities of Brussel sprouts caused rapid weight loss?...a safe, no-fail patented weight-loss pill was developed by a drug company?