1. Laws of Demand

2. In a market who is the consumer?
Discuss
What is a market?
In a market who is the consumer?
How does the price of a good affect the consumer?

3. Market
An arrangement that allows buyers and sellers to exchange things
Markets exist because no one is self sufficient and no one produces all we require to satisfy all our needs and wants.

4. Demand
Description
The quantities of a particular good or service consumers are willing and able to buy at different possible prices at a particular time

5. Demand Illustration p.1 sec. 1
As price goes up, quantity demanded goes down
Price D1
Quantity

6. Discuss How does demand and “want” or “desire” differ?
You may want or desire a new car or a closet full of clothes, but you demand these things only when you are willing and able to buy them.

7. Quantity Demand
The quantities of a particular good or service consumers are willing and able to buy at set prices at a particular time

8. Quantity Demand Illustration
Price D2
Quantity

9. Demand Schedule
How much people are going to buy at the various prices.
Ex. The price of pizza
Price
Quantity
$.50
$1.00
$1.50
$2.00
$2.50

10. Law of Demand As price goes up quantity goes down
As price goes down quantity goes up
People buy less of something at higher prices than they do at lower prices.

11. ELASTIC DEMAND: demand that is very sensitive to a change in price
goods that one might stop buying or cut back on as price increased (SUVs, Luxury items)**on a graph this demand curve will be FLAT

12. INELASTIC DEMAND
demand that is not very sensitive to a change in price
goods that you would buy at any price; there are few if any substitutes for these goods.
(milk, gas, prescription drugs) **on a graph this demand curve would be very steep.

13. Illustration of Decrease and Increase in Demand
Decrease in Price
Increase in Price
Price
Price D2 D2 D1 D1
Quantity
Quantity
The less you buy the more you will move to the left!

14. The Demand Curve
The Demand Curve slopes downward to the right because the consumer is willing and able to buy more gasoline at lower prices than at higher prices.

15. Scenario #1
Harris Teeter is advertising a sale on hot dog buns. What is the impact on the demand for hot dogs?

16. Scenario #2
Playstation 3, the newest video game console, hits stores. What is the impact on the demand for Xbox 360?

17. Scenario #3
The weatherman forecasts rain for the weekend in Charlotte. What is the impact on the demand for umbrellas?

18. Scenario #4
The N.C. General Assembly increases minimum wage to $7/hour. What is the impact on the demand for clothing?

19. Scenario #5
A snowy blizzard blows through Charlotte. What is the impact on the demand for snow boots?

20. Scenario #6
The price of MP3 players decreases dramatically due to new technology. What is the impact on the demand for portable CD players?

21. Scenario #7
Summertime is approaching. What is the impact on the demand for shorts?

22. Scenario #8
The price of hamburgers increases at Food Lion. What is the impact on the demand for French fries?

23. Changes in Demand

24. Reasons Demand can change
People’s Income
Weather
Complementary Goods
Substitute Goods

25. What is a Complementary Good?
Complementary Good: Two goods that are usually consumed together (Hot Dogs & buns)

26. What is a Substitute Good?
Substitute Good: An acceptable replacement for a good (Playstation & Xbox)

27. People’s Income Increases
Effect on Demand
Demand Increases
(shift right) D1 D2 Q

28. Bad Weather (for product)
Effect on Demand
Demand Decreases
(shift left) P D1 D2 Q

29. Price of Complementary Good Decreases (ex: peanut butter & jelly)
Effect on Demand
Demand Increases
(shift right) D1 D2 Q
Peanut Butter

30. Price of Substitute Good Decreases (ex: Pepsi & Coca-Cola)
Effect on Demand
Demand Decreases
(shift left) D1 D2 Q
Pepsi

31. Complementary vs. Substitute
Can YOU tell the difference????

32. Substitute

33. Complementary

34. Substitute

35. Complementary

36. Substitute

37. Substitute

38. Complementary

39. Elasticity of Demand
How much the quantity demanded will change if the price rises or falls.

40. Supply

41. Now you are the producer Think about the business you are creating
Discuss
Now you are the producer
Think about the business you are creating
Things are now going to reverse

42. Supply
Description
The quantity of goods a producer is willing and able to sell at various prices at a particular time. P S1 Q

43. Quantity Supplied
The quantity of goods a producer is willing and able to sell at a set price at a particular time. P S1 Q

44. Supply Schedule
A list of quantities supplied by a provider at certain prices
Price
Quantity
$.50 1
$1.00 2
$1.50 3
$2.00 4
$2.50 5

45. Law of Supply As price goes up, quantity goes up
As price goes down, quantity goes down
More items will be offered for sale at a higher price than at a lower price

46. Illustrate an Increase in Supply
Price S1 S2
Quantity

47. Illustrate a Decrease in Supply
Price S2 S1
Quantity

48. Supply Curve
The Supply Curve slopes upward and to the right because the producer is willing and able to sell more products at higher prices than at lower prices.

49. Change in Supply

50. Reasons for change in Supply
Cost of Inputs
Number of Suppliers
Weather

51. Costs of Inputs Decrease
Effect on Supply
Supply Increases
(shift right)
Spending less to run the business
Examples
Land
Labor
Capital P S1 S2 Q

52. Number of Suppliers Increases
Effect on Supply
Supply Increases
(shift right)
Example: Basketballs
Dicks Sporting Goods
Sports Authority
Footlocker P S1 S2 Q

53. Weather is bad for product
Effect on Supply
Supply Decreases
(shift left)
Example
A hurricane during the orange growing season P S1 Q

54. SO… can you apply this knowledge?
1) Together lets decide if the following scenarios are a change in…
Input costs
Number of suppliers
Weather
2) Then decide if it will
Increase supply
Decrease Supply

55. -number of suppliers changes -Supply Decreases
Situation #1
Dick’s Sporting Goods goes out of business. What is the impact on basketballs in Charlotte?
-number of suppliers changes
-Supply Decreases

56. Situation #2
A hurricane destroys the orange groves in Florida. What is the impact on the supply of Orange Juice?
-weather changes
-Supply Decreases

57. The price of gas decreases. What is the impact of trucking companies?
Situation #3
The price of gas decreases. What is the impact of trucking companies?
-cost of inputs change
-Supply Increase

58. Situation #4
Nike moves their factory from the U.S. to China where workers are paid less. What is the impact on the supply of Nike’s shoes?
-change in input costs
-Supply Increases

59. Supply and Demand together

60. Equilibrium: the point at which quantity demanded and quantity supplied are equal

61. At a point of equilibrium….
the price and quantity are balanced
the market for a good/service is stable

62. Disequilibrium: any price or quantity not at equilibrium

63. Excess Demand: when quantity demanded is more than quantity supplied
aka SHORTAGE!!!!
shortage

64. Excess Supply: when quantity supplied is more than quantity demanded
aka SURPLUS!!!!
surplus

65. A shift in the demand curve or the supply curve will result in a new equilibrium price.

66. Government Intervention in a Market Economy
Price Ceiling: a maximum price that can be legally charged for a good or service
(example: rent control)
 Price Floor: a minimum price for a good or service
(example: minimum wage)

67. Inflation and Deflation
 Inflation: a general increase in prices (over the years, prices rise and fall, but in the American economy, they have mostly risen)
 Deflation: A substantial drop in the prices