+ Supply & Demand. + Ceteris paribus Latin phrase that means “all other things remain the same” What causes supply and demand to change?

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Presentation transcript:

+ Supply & Demand

+ Ceteris paribus Latin phrase that means “all other things remain the same” What causes supply and demand to change?

+ Finding equilibrium

+ Determinants of demand Cause a change in demand Will affect the equilibrium price and/or equilibrium quantity

+ 1. Change in consumers’ income Examples?

+ 2. Change in consumers’ preferences Examples?

+ 3. Change in the prices of related goods/services Complements: things that go together—hot dogs and buns, cars and gasoline Substitutes: Coke versus Pepsi, Pizza Hut versus Dominos, Wendy’s versus McDonalds

+ 4. Change in the number of consumers in a market Examples?

+ 5. Change in expectation of buyers Examples?

+ Market survey: Demand for shoes PriceBeforeAfter $10005 $90510 $ $ $ Graph the two demand curves from the data below:

+

+ Determinants of demand Cause a change in demand Change in demand results from a change in… 1. Consumers’ incomes 2. Consumers’ preferences 3. Prices of related goods or services (complements or substitutes) 4. Number of consumers in a market 5. Expectations of buyers Will affect the equilibrium price and/or equilibrium quantity

+ Determinants of supply Cause a change in supply Change in supply results from a change in… 1. Price of resources used to make good/service 2. Technology used to make the good/service 3. Number of sellers in the market 4. Expectations of producers 5. Natural disasters & international events 6. Government actions Will affect the equilibrium price and/or equilibrium quantity

+ 1. Change in price of resources Examples?

+ 2. Change in technology

+ 3. Change in number of sellers Examples?

+ 4. Expectations of producers Examples?

+ 5. Natural disasters & other events

+ 6. Government actions Subsidy Excise Tax

+ Market survey: Supply of babysitters PriceBeforeAfter $ $15209 $12157 $8105 $552 Graph the two demand curves from the data below:

+

+ Determinants of supply Cause a change in supply Change in supply results from a change in… 1. Price of resources used to make good/service 2. Technology used to make the good/service 3. Number of sellers in the market 4. Expectations of producers 5. Natural disasters & international events 6. Government actions Will affect the equilibrium price and/or equilibrium quantity