1. Supply & Demand 4 Markets STUDY this power point CAREFULLY!
# 13-#18
#19
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2. OR Law of Demand When price increases . . . When price decreases . . .
quantity demanded decreases. OR
When price decreases . . .
quantity demanded increases.
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3. This is called the law of demand!!!
It shows the inverse relationship between price & quantity demanded.
P↑ QD↓
P↓ QD↑
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4. Change in Quantity Demanded
A change in quantity demanded is caused by a change in price. This is the only reason for a change in quantity demanded.
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5. P P2 P1 D Q2 Q1 Q
 QD
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6. Law of Supply
As the price of an item goes up, the quantity supplied will increase; as the price of an item goes down, the quantity supplied will decrease.
P QS or P QS
Direct relationship between price and quantity supplied (QS)
Given production costs, a higher price means greater profits and an incentive for producers to increase quantity supplied.
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7. Change in QS
Caused by a change in the price of the item. This is shown by a movement along the curve.
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8. Change in QS P S1 P1 P2 Q2 Q1 Q
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9. Sometimes there are non-price determinants that cause a shift in the demand or supply curve.
The original demand or supply curve is no longer valid. We must have a new curve. This is called a shift of the demand or supply curve
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10. The entire demand curve shifts.
Increase in Demand Decrease in Demand P P D1 D2 D2 D1 Q Q
Shift Right
Shift Left
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11. SIX Reasons for a Change in Demand
(shifts the whole demand curve) NOT about price
Change in consumer Taste
Change in consumer Income
Change in Market Size or buyers
Change in consumer Expectations
Substitutes
Compliments
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12. Examples! Demand curve shift
** John gets a raise. This causes a shift in the demand curve. What direction does the curve shift? ** Mariah sees that the price of Tostito chips has gone up, so she buys Doritos instead. This is an example of a ______. **A news report says that the spinach in Texas has poison. This causes a change in consumer _______. The curve shifts to the ________
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13. Demand curve shift
** John gets a raise. This causes a shift in the demand curve. What direction does the curve shift? RIGHT (increase) ** Mariah sees that the price of Tostito chips has gone up, so she buys Doritos instead. This is an example of a SUBSTITUTE__. ** A news report says that the spinach in Texas has poison. This causes a change in consumer TASTE_. The curve shifts to the LEFT (decrease)
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14. Profit is what motivates producers so the
higher the profit, the greater amount
they will produce.
Consumers want the BEST product at the LOWEST cost. Consumers want to save money!
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15. Buyers and sellers have opposite goals. Buyers want the lowest price
Buyers and sellers have opposite goals. Buyers want the lowest price. Sellers want the highest price. Buyers relate to DEMAND Sellers relate to SUPPLY
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16. Change in Supply Change in cost of inputs (resources) Productivity
Change in technology
Change in taxes or subsidies
Change in government regulations
Change in # of sellers
Change in producer expectations
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17. Decrease in Supply - Shift Left Increase in Supply - Shift Right$ S1 $ S2 Q Q
Decrease in Supply - Shift Left
Increase in Supply - Shift Right
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18. Markets Schedule –LIST of Price and QS
Demand Schedule $ QD
Supply Schedule $ QS
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19. Market – Supply & Demand curve 13. What is the equilibrium price below?$ 30 S 20 10 D Q 20 40 EQ 60
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20. 13. The answer is $20. Look back at the graph if you missed this
13. The answer is $20. Look back at the graph if you missed this! Market equilibrium – where quantity demanded and quantity supplied are equal
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21. Surplus A price above equilibrium creates a surplus.
A surplus is when QS is greater than QD.
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22. Shortage A price below equilibrium created a shortage.
Shortage is when QD is greater than QS.
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23. Sample Test Questions
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24. Sample Test Questions – notice that these 2 questions ask the same thing in a different way.
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25. 4 MARKETS 1-Pure Competition
Model does not exist
Infinite number of sellers
Consumers have access to all information.
Sellers have no control over prices.
Identical products
Buyer does not prefer one item over the other.
Most competitive
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26. Monopolistic Competition
Most common
Some product differentiation
Non-price competition
Most competitive of imperfect competition- many sellers
Most companies operate here
Because it’s easy to start.
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27. Oligopoly
Few, large firms dominate the market (70-80% of the market concentration).
Not as much competition- Firms have some control over prices.
Price leadership
Collusion
Price fixing
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28. Monopoly One seller No competition- barriers to market entry
No product differentiation
Legal types
Natural
Technological- Patent or copyright
Governmental
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