Supply & Demand An Introduction

Introduction to Demand Based on consumer desires, abilities, and willingness 2 Factors: Price & Quantity How would number of tickets sold to a movie change if price went from $5 to $10?

Individual’s Demand Schedule PriceQuantity Demanded $100 $90 $61 $42 $33 $24 # of burritos someone might buy at different prices Price is an incentive Person demands more as price goes down Ability, desire, & willingness affected by income, hunger, & many other things

Individual’s Demand Curve Shows same things as Demand Schedule Demand Curve goes downward (negative slope)

Discussion Question What would make someone choose to look at one depiction of demand (schedule/curve) instead of the other?

The Law of Demand The quantity demanded of a good or service varies inversely with its price. People will almost always buy more of something when the price goes down. Common sense tells us the same thing, this is why things go on sale.

Market Demand Curve Shows quantities demanded by everyone interested in purchasing a product. Add together quantity demanded at each price for each individual.

Demand & Marginal Utility Marginal utility is added usefulness or satisfaction someone gets from acquiring one more of something. We buy things because it is useful and gives us satisfaction (utility). When we use a product we experience diminishing marginal utility Not usually willing to pay the same price for more This is why demand curves slope downward

Discussion Question Draw a demand curve Label the following: PriceQuantity

Introduction to Supply Supply is based on suppliers cost and profit 2 Factors: Price & Quantity

Supply Schedule PriceQuantity Supplied $94 $63.5 $43 $22 $10 List of quantities supplied at all possible prices Difference between Supply & Demand Schedules – As price goes up quantity supplied goes up too High price (profit) in the supplier’s incentive

Individual Supply Curve Shows same thing as Supply Schedule Supply curve goes upward (positive slope)

Law of Supply The quantity supplied varies directly with the price of the product.

Market Supply Curve Shows quantities offered by multiple suppliers in a market Add the number supplied by all suppliers at every price

Discussion Question How do you think Supply & Demand interact with each other?