1. Bell Ringer 54
Name 3 musical artists whose CD’s or downloads are in high demand right now.
Name 3 musical artists whose CD’s or downloads are really lame and no one wants to listen to them anymore.
What is demand? (448)

2. The Law of Demand
The law of demand holds that other things equal, as the price of a good or service rises, its quantity demanded falls.
The reverse is also true: as the price of a good or service falls, its quantity demanded increases.
Inverse relationship between price and quantity
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4. Demand Curve
The demand curve has a negative slope, consistent with the law of demand.
© OnlineTexts.com p. 4

5. Demand Curve
$150
$125
$100
$75
$50
$25 P D Q

6. Let’s Practice

7. Bell Ringer 55
To examine all the possible prices and quantities demanded for a product we represent demand graphically with a….(449)
We demand products because they have “utility” to us. Define utility and identify one product that would have great utility to you right now. (450)
I demand service!

8. What causes a change in demand?
Factors besides price can affect the entire demand curve. These factors are outside of the control of the entrepreneur and focus on the consumers wants and needs or external market forces.
The Entire Demand Curve Moves!

9. Change in Demand
Before a hurricane, Winn Dixie sold 20 cases of bottled water a $4 per case.
When a hurricane was approaching, Winn Dixie sold 40 cases of bottled water a per case.

10. What does a Change in Demand look like?
Left or right movement of the entire curve
Movement to left is a decrease
Movement to right is an increase

11. Why does Demand Change? Number of consumers (increases or decreases)
Consumer income (increases or decreases)
Consumer tastes (fashion/tech changes)
Consumer expectations (seasons change)
Substitutes (steak too expensive, buy chicken)
Complements (cost of potatoes for fries goes down, demand more ketchup)

12. Change in Demand Poster
Pick a product
Choose a non-price cause for a change in the demand for that product
Decide if the change will be an increase to the right or a decrease to the left
Draw an image of the product and an image portraying the cause for the change
Draw a demand curve labeled D1 and then show the change to a curve labeled D2
Are you really not getting this?

13. Increase in Demand for Candy Corn
Product=Candy Corn P
Consumer Expectations
Halloween is fast approaching and millions of Americans are expecting that Trick or Treaters will want candy corn. Everyone rushes to their local stores to purchase this delicious holiday confection. D2 D1 Q

14. Bell Ringer 56 Define the “law of diminishing marginal utility”. (451)
Sunshine has great utility to a kid during the summer, but what will happen if kids don’t obey the law of diminishing marginal utility?

15. What are substitute goods? Give an example on Halloween. (454)
What are complementary goods? Give an example on Halloween. ( )
Bell Ringer 57

16. Change in Quantity Demanded
$150
$125
$100
$75
$50
$25 P1
Change in Quantity Demanded P P2 D Q

17. Change in Demand vs. Change in Quantity Demanded

18. Change in Quantity Demanded
Caused by a change in price

19. Bell Ringer 58
Which graph on the right shows a change in quantity demanded? (A or B)
When quantity demanded for a product is very sensitive to a change in price, we call this….? (455)
Graph A Graph B

20. Bell Ringer 59 What is the law of supply? (463)
What motivates businesses and entrepreneurs to supply products? (464)
Supply can be elastic or inelastic, just like demand. Draw a perfectly inelastic curve and a perfectly elastic curve. (very easy)

21. Elasticity of Demand Inelastic Demand Elastic Demand Vertical
Elasticity of demand is a measure used in economics to show the responsiveness or sensitivity of the quantity demanded of a good or service to a change in its price.
Inelastic Demand
Vertical
Elastic Demand
Horizontal

22. The Law of Supply
The law of supply holds that other things equal, as the price of a good rises, its quantity supplied will rise, and vice versa.
Why do producers produce more output when prices rise?
They seek higher profits
They can cover higher marginal costs of production
Direct relationship between price and quantity
© OnlineTexts.com p. 22

23. Supply Curve Supply Schedule S P 0 5 10 15 20 25 Q $100 $80 $60 $40
$20 S P Q
100 20 80 15 60 8 40 6 2 P Q

24. Let’s Practice

25. A change in supply
Several factors besides price can affect the entire supply curve. If a change in a suppliers situation changes or the market changes, then supply will shift.

26. Why does supply change?

27. Technology changes

28. Number of Suppliers changes

29. Change in supplier expectations

30. Cost of Resources (factors of production)

31. Productivity changes

32. Change in Government Policy/Subsidies

33. Taxes

34. A change in quantity supplied
As the price people are willing to pay moves along a supply curve, the quantity supplied will increase or decrease accordingly

35. Change in Supply vs. Change in Quantity Supplied

36. Elasticity of Supply
Elasticity of supply is a measure used in economics to show the responsiveness, or sensitivity of the quantity supplied of a good or service to a change in its price.
Elastic: easily produced if demand increases
Inelastic: Hard to quickly produce or replace if demand increases

37. Equilibrium In economics, an equilibrium is a situation in which:
there is no inherent tendency to change,
quantity demanded equals quantity supplied, and
the market just clears.
© OnlineTexts.com p. 37

38. What is created at the point where supply and demand meet? (473)
Bell Ringer 60
What is created at the point where supply and demand meet? (473)
What is a surplus? (472)
What is a shortage? (472)
A marketplace obeys natural laws and seeks balance between supply and demand. Just like our sun obeys natural laws and seeks balance between internal pressure from nuclear fusion and external pressure from gravity.

39. Combined Supply and Demand Curves
$100
$80
$60
$40
$20 S P Q
100 20 2 80 15 6 60 8 40 e P D Q

40. What is the equilibrium price?
The equilibrium price is a price that creates neither a surplus or a shortage in the market.
Equilibrium price is always marked with a lower case “e” on the graph.

41. Market Failures Surplus and Shortage
A surplus is a situation in which the quantity supplied is greater than the quantity demanded. Having more than what you need of something.
A shortage is a situation in which the quantity demanded is greater than the quantity supplied. Having less than what you need of something.

42. Equilibrium After a Demand Shift
The shift in the demand curve moves the market equilibrium from point A to point B, resulting in a higher price and higher quantity.
© OnlineTexts.com p. 42

43. Equilibrium After a Supply Shift
The shift in the supply curve moves the market equilibrium from point A to point B, resulting in a higher price and lower quantity.
© OnlineTexts.com p. 43

44. Market Interference
Market Ceiling
Market Floor

45. Price Floor
A price floor is set above an equilibrium price. Here it is set at $4 resulting in a surplus of 20 units.

46. Price Ceiling
A price ceiling is set below an equilibrium price. Here it is at $2 resulting in a shortage of 20 units.

47. Bell Ringer 61 Which graph below shows a change in quantity demanded?
Which graph below shows an increase in supply?

48. Surplus shortage increase in supply increase in quantity supplied increase in quantity demanded
Increase in demand decrease in supply decrease in quantity supplied decrease in quantity demanded decrease in demand

49. Rank in Number of Businesses
Business Structures
Business Structure
Sole Proprietorship
Partnership
Corporation
Definition
Advantages
Disadvantages
Rank in Number of Businesses
Rank in Sales