1. Bell Question:
Think back to Monday’s T-shirt activity. What happened to the demand of t-shirts when the price increased? Decreased?
What do you think effects demand?

2. Chapter 7
Demand and Supply

3. Chapter 7 Section 1
Demand

4. The “Marketplace”
Consumers influence the price of goods in a market economy.
Demand: the amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period
Supply: the amount of a good or service that producers are able and willing to sell at various prices during a specified time period
A market represents actions between buyers and sellers.

5. Voluntary Exchange
The basis of activity in a market economy is the principle of voluntary exchange.
Voluntary Exchange: a transaction in which a buyer and seller exercise their economic freedom by working out their own terms of exchange
The seller sets the price and the buyer agrees to the product and price through the act of purchasing the product
Supply and demand analysis is a model of how buyers and sellers behave in the marketplace.

6. Example: Buying a used car
Seller: sells a used car, determines the price, lists it for sale
Buyer: checks out car, determine if the car is worth the price
Transaction made:
Seller benefits= makes $$
Buyer Benefits= Now has a car to use
Both are better off then before the transaction

7. The Law of Demand
Demand is created only when the customer is both willing and able to buy the product.
The law of demand states:
As price goes up, quantity demanded goes down.
As price goes down, quantity demanded goes up.

8. Part 1. As PRICE increases, DEMAND decreases
Part 2. As PRICE decreases, DEMAND increases
Price goes up
Demand goes down
THEN
Price goes down
Demand goes up
THEN

9. Demand Curves= shifts Down to the Dirt

10. Example: BLACK FRIDAY SHOPPING Sales: prices go down, demand goes up

11. The Law of Demand Real Income Effect Substitution Effect
People are limited by their income as to what they can purchase.
Real income effect forces people to make trade-offs.
Substitution Effect
People can replace one product with another if it satisfies the same need.
Amazon Prime Music vs. iTunes
Iphone vs. Android
Pepsi vs. Coca-Cola

12. The Law of Demand Diminishing Marginal Utility
People will purchase additional items until the satisfaction from the last unit is equal to the price.
The lessening of this satisfaction with each additional purchase is called diminishing marginal utility.
Utility: the ability of any good or service to satisfy consumer wants

13. Law of Diminishing Marginal Utility:
Buy a Pumpkin Spice Latte from Starbucks=$4.25
Go back in line, buy another, then another, then another.
Is it worth the $4.25 the second third or fourth time?
Does your utility (satisfaction) for that product with that same price increase or decrease with each additional purchase?

14. https://youtu.be/S7E9g0x4nms

15. Describe how this political cartoon represents the law of demand
Describe how this political cartoon represents the law of demand. Complete your answer in at least 3 sentences. Be prepared to share with other groups

16. https://youtu.be/LwLh6ax0zTE

17. Which of the following is defined as the ability of any good or service to satisfy consumer wants?
A) Demand
B) Supply
C) Real income effect
D) Utility

18. Success Criteria I can define the law of demand.
I can give an example of:
Real income effect:
Substitution effect:
Diminishing marginal utility:

19. Bell Question
What is a substitute product? Pepsi is a substitute for Coca-Cola. List three substitutes of your own (for any good or service)
Be prepared to share your answer with a classmate

20. The Demand Curve and Elasticity of Demand
Chapter 7 Section 2
The Demand Curve and Elasticity of Demand

21. Graphing the Demand Curve
Demand schedule: a table of prices and the quantity demanded at each price.
To draw a demand curve:
List the quantity demanded at each price.
The Curve will graph the quantity demanded of a good or service at each possible price.

23. Quantity Demanded vs. Demand
A change in quantity demanded is caused by a change in the price of a good.
If something other than price causes demand to increase or decrease, this is known as a change in demand and shifts the demand curve.

24. Quantity Demanded vs. Demand

25. Determinants of Demand
Population
When population increases, opportunities to buy and sell increase.
Demand for most products increases, shifting the curve to the right.
Income
An increased income allows consumers to buy more products or a greater quantity of a single product.
Tastes and preferences, including fads
Refers to what people like and prefer to choose.

26. Determinants of Demand
5. Substitutes
When a new competitor is added or an old competitor leaves the market.
Butter vs. Margarine
6. Complementary goods
Products that rely upon one another, demand for one affects demand for the other.
The decrease in the price of one product will cause an increase in demand for both products.
Cameras and film

27. Complimentary goods

28. Substitutes

29. https://youtu.be/Z1Auh-G--vQ

30. Demand Practice Problems
The number of babies born in 2016 has decreased, what would happen to the demand for infant car seats? Which way would the demand curve shift?
Gucci Mane has won a MTV Artist of the Year award, what would happen to the demand for his album? Which way would the demand curve shift?

31. Demand Practice Problems
The price of cell phones has gone up, how would that effect the demand for head phones? Which way would the demand curve shift for headphones?
Anchor Bay Schools decides to give each employee a $2,000 bonus before Christmas, what would happen to the demand for gifts at local malls? Which way would the demand curve shift?

32. The Price Elasticity of Demand
Elasticity: economic concept dealing with consumers’ responsiveness to an increase or decrease in price of a product
Price Elasticity of Demand: economic concept that deals with how much demand varies according to changes in price

33. The Price Elasticity of Demand
Elastic Demand
Occurs when the demand for some goods is greatly affected by the price.
One particular brand of coffee increases in price; consumers will purchase more of the other brands.
Inelastic Demand
Occurs when the demand for some goods is less affected by price.
Salt, pepper, and sugar are products consumers will purchase at almost any cost.

34. https://youtu.be/HHcblIxiAAk

35. The Price Elasticity of Demand
What Determines Price Elasticity of Demand?
How many substitutes exist and how closely they provide the same quality and service.
Fewer or no substitutes make demand inelastic.
Percent of a personal budget spent on an item
The higher the percent of budget, the more elastic the demand.
How much consumers have to adjust to the new price.
More time makes for greater elasticity.

36. Describe how this cartoon represents inelastic demand.

37. Describe how this cartoon represents elastic demand.

38. Success Criteria:
I can list the determinants that cause a demand curve to shift.
I can give an example of an:
Elastic good:
Inelastic good:

39. Bell Question:
What would be the motivation for a business to supply more of a product?

40. The Law of Supply and the Supply Curve
Chapter 7 Section 3
The Law of Supply and the Supply Curve

41. The Law of Supply
Supply is the willingness and ability to provide goods to the consumers.
The Law of Supply states:
As the price rises for a good the quantity supplied generally rises.
As the price falls, the quantity supplied also falls.
A direct relationship exists between price and quantity supplied.

42. The Incentive of Greater Profit
Increase in price and increase in production leads to an increase in profits.
Higher prices encourage more competition to join the market.
Higher prices turn potential suppliers into actual suppliers, adding to the total output.

43. The Supply Curve
As with demand, graphs and tables can explain the Law of Supply.
Supply schedule: shows the quantity supplied at each given price.
A supply curve graphs the quantities supplied at each possible price.
The relationship between quantity and price is direct and always moving in the same direction.

45. The Supply Curve= shifts high to the sky

46. Quantity Supplied vs. Supply
A change in quantity supplied is caused by a change in price.
Something other than price can cause a change in supply as a whole to increase or decrease. Causing the supply curve to shift left or right

47. Changes in Supply
Change in the quantity supplied due to a price change occurs ALONG the supply curve

49. Determinants of Supply
1. Price of Inputs
The price of inputs, or the costs of production- raw materials, wages, insurance, utilities, etc.- can cause an increase in supply.
2. Number of Firms in the Industry
Competition, or the number of companies in an industry, can cause an increase in supply

50. Determinants of Supply
3. Taxes
An increase in taxes can cause a decrease in supply.
If taxes increase, businesses will not be willing to supply as much as before because the cost of production will rise.
4. Technology
An improvement in technology can cause an increase in supply
Technology: the science used to develop new products or methods of production and distribution.

51. Changes in Supply
Several factors will change the demand for the good (shift the entire demand curve)
As an example, suppose that there is an improvement in the technology used to produce widgets.

52. Changes in Supply
Supply can also decrease due to factors other than a change in price.
As an example, suppose that a large number of Widget producers go out of business, decreasing the number of suppliers.

53. Supply Practice Problems
The price of flour went up, what would happen to the supply of bread? Which way would the supply curve shift?
A robot can now make donuts at Tim Hortons at a faster rate, what would happen to the supply of donuts? Which way would the supply curve shift?

54. Supply Practice Problems
The government has increased taxes, how would this effect supply? Which way would it shift?
Three new coney island restaurants have opened up in New Baltimore, what would happen to the SUPPLY of coney dogs in New Baltimore? Which way would it shift?

55. Minimum wage has increased, how would this effect supply
Minimum wage has increased, how would this effect supply? Which way would the supply curve shift?
Gas prices have dropped, how would this effect supply? Which way would the supply curve shift?

56. Factors that Shift Supply
Resource
Prices
Technology
And
Productivity
Expectations Of
Producers
Number
Prices of Related
Goods and Services

57. The Law of Diminishing Returns
Adding units to increase production increases total output for a limited time period.
The extra output for each additional unit will eventually decrease.
Businesses will continue to add units of a factor of production until doing so no longer increases revenue.
Too many workers employed, not enough work

58. http://www. investopedia. com/terms/l/lawofdiminis hingmarginalreturn
hingmarginalreturn.asp

59. The law of diminishing returns states that after a certain point, _____. A) prices will not keep up with quantity supplied B) workers will be unable to expand productivity C) output will fall D) increases in output will not keep pace with increases in labor or machinery

60. The law of diminishing returns states that after a certain point, _____. A) prices will not keep up with quantity supplied B) workers will be unable to expand productivity C) output will fall D) increases in output will not keep pace with increases in labor or machinery

61. https://youtu.be/ewPNugIqCUM

62. Success Criteria: I can describe the law of supply:
I can list the determinants that shift a supply curve:

63. Bell Question

64. Putting Supply and Demand Together
Chapter 7 Section 4
Putting Supply and Demand Together

65. Supply Demand Dance
dance-man/

66. Group Discussion Questions for We the economy video
How does the consumer interest in the canes start?
What makes the price go up initially?
What is Kristen and Jonathan’s motivation for ordering more canes?
What are the factors that cause the price of the canes to continue to go up?
What causes the surplus?
How does the surplus affect the cost of the canes?
What are the factors that cause the price of the canes to continue to go down?

67. Equilibrium Price In the real world, demand and supply work together.
As the price of goods goes down, the quantity demanded rises and the quantity supplied falls.
As the price goes up, the quantity demanded falls and the quantity supplied rises.

68. Equilibrium Price
Sellers and buyers work together indirectly to place goods and the equilibrium price.
Equilibrium Price: the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy

69. MARKET EQUILIBRIUM
Figure 4.9 shows the
equilibrium price and
equilibrium quantity.
1. Market equilibrium at the intersection of the demand curve and the supply curve.
2. The equilibrium price is $1 a bottle.
3. The equilibrium quantity is 10 million bottles a day.

70. Shifts in Equilibrium Price
If the demand curve shifts due to something other than price, the equilibrium price will change.
If the supply curve shifts due to something other than price, the equilibrium price will change.

71. Prices Serve as Signals
Rising prices signal producers to make more and consumers to purchase less.
Falling prices signal producers to make less and consumers to purchase more.

72. Prices Serve as Signals
Types of Signals:
Shortages
Occurs when the quantity demanded (at equilibrium price) is greater than the quantity supplied.
Surpluses
Occurs when the quantity supplied (at equilibrium price) is grater than quantity demanded.
Market Forces
Can cause the prices to rise or fall to correct shortages and surpluses.

73. Price Controls
On occasion the government will get involved in setting prices.
If the government believes the market forces of supply and demand are unfair it may try to protect consumers and suppliers.
Special interest groups use pressure on elected officials to protect certain industries.

74. 4.3 MARKET EQUILIBRIUM Figure 4.10(a) market achieves equilibrium.
At $1.50 a bottle:
1. Quantity supplied is 11 bottles.
2. Quantity demanded is 9 bottles.
3. There is a surplus.
4. Price falls until the market is in equilibrium.

75. 4.3 MARKET EQUILIBRIUM Figure 4.10(b) market achieves equilibrium.
At 75 cents a bottle:
5. Quantity demanded is 11 bottles.
6. Quantity supplied is 9 bottles.
7. There is a shortage.
8. Price rises until the market is in equilibrium.

76. Price Controls Price Ceilings Price Floors
Price Ceilings: a maximum price set by the government to prevent prices from going above a certain level.
Items in short supply might be rationed.
Shortages can lead to a black market, or illegal places to purchase such products at exorbitant prices.
Price Floors
Price Floors: a minimum price set by the government to prevent prices from going below a certain level
Price floors set minimum wage levels and support agricultural prices.

77. Mr. Clifford Economics

78. PP 198 in your textbook
Look at figure 7.13, answer the following question
What is the surplus of workers when the hourly wage price floor is 5.15?

79. ACDC MOVIES: SUPPLY/DEMAND
Wetheeconomy.com

80. Success Criteria: I can define equilibrium price:
I can determine the effects of government price controls: