1. Shifting Supply and Demand

2. Shifting Demand – Causes
Income
increase
higher demand for “Normal Goods”
NORMAL GOODS – those ordinary purchases people make
decrease
lower demand for Normal Goods
increased demand for “Inferior Goods”
INFERIOR GOODS – those things you purchase which you desire less, but resort to purchasing if your income drops

3. Shifting Demand – Causes
Expectations
expecting higher prices in the near future increases demand today
expecting lower prices in the near future decreases demand today
Population
higher populations = higher market demand
lower populations = lower market demand

4. Shifting Demand – Causes
Demographics
different categories of people
age
race
gender
pay/profession
a rise in certain demographic categories increases demand for goods that cater to those groups
a decrease in certain demographic categories decreases demand for goods that cater to those groups

5. Shifting Demand – Causes
Tastes and Advertising
media affects what people desire
fads – temporary desire for certain goods
pet rocks
heelys

6. Shifting Demand – Causes
Costs of “Related Goods”
Complements
goods used together
iPods and earbuds
cereal and milk
a rise in the cost of one decreases the demand of the other
a decrease in the cost of one increases the demand of the other

7. Shifting Demand – Causes
Costs of “Related Goods”
Substitutes
goods used in place of each other
butter or margarine
cable vs. direct tv
a rise in the cost of one increases the demand for the other
a decrease in the cost of one decreases the demand for the other

8. Shifting Demand – Graphing
an increase in demand
shifts ONLY the demand curve to the right
increases the price where equilibrium lies

9. Shifting Demand – Graphing
a decrease in demand
shifts ONLY the demand curve to the left
decreases the price where equilibrium lies

10. Shifting Supply – Causes
costs of resources to create the product
examples
new gas fields discovered lowers cost oil
a severe drought makes more irrigation necessary, increasing the costs to farmers
increasing costs = decreased supply
decreasing costs = increased supply

11. Shifting Supply – Causes
Technology
better technology lowers production costs
better technology increases supply
Subsidies
government money given to a business to product a good or service
increased subsidies = increased supply
decreased subsidies = decreased supply

12. Shifting Supply – Causes
excise tax
a government tax on the production or sale of a good or service
raises the overall cost of the product
higher taxes = decreased supply
lower taxes = increased supply

13. Shifting Supply – Causes
Regulations
government rules on production of goods
meeting the government regulations increases costs to producers
increased regulation = decreased supply
decreased regulation = increased supply

14. Shifting Supply – Causes
events in other countries
other countries can increase THEIR supply of traded goods
= increased supplies of those goods for US
other countries must decrease THEIR supply of traded goods
= decreased supplies of those goods for US

15. Shifting Supply – Causes
future expectations
producers believe prices will rise in future
decreased supply now
increased supply later
producers believe prices will drop in future
increased supply now
decreased supply later

16. Shifting Supply – Causes
number of suppliers
more suppliers = increased supply
less suppliers = decreased supply

17. Shifting Supply – Graphing
an increase in supply
shifts ONLY the supply curve to the right
decreases the price where equilibrium lies

18. Shifting Supply – Graphing
decrease in supply
shifts ONLY the supply curve to the left
increases the price where equilibrium lies