1. Lets put both together now…
SUPPLY
DEMAND
Lets put both together now…

2. Market Equilibrium – exists at the only price D Q
Definitions:
Market Equilibrium – exists at the only price
where Qs = Qd, AKA Market Clearing Price

3. ** we do NOT say where supply equals demand
Market
Equilibrium D
Vocab: Q
** we do NOT say where supply equals demand
“supply” means the whole curve, “demand”
means the whole curve. “S=D” makes no sense.

4. Equilibrium is where quantity supplied equals quantity demanded.
Market
Equilibrium D
Vocab: Q
Equilibrium is where quantity supplied equals
quantity demanded.

5. Equilibrium price and equilibrium quantity are S P D Q Q
Equilibrium price and equilibrium quantity are
represented by P & Q. Lines to them are dashed.

6. A shift in either supply or demand will change the market equilibrium.

7. A shift in either supply or demand will change the market equilibrium.
Example:
increase
in supply P S S1 P Q D Q
A shift in either supply or demand will change
the market equilibrium.

8. The resulting change in P and Q are represented
Example:
increase
in supply P S S1 P Q P1 D Q1 Q
The resulting change in P and Q are represented
by Q1 and P1, if there is more than one they are
Q2 and P2 and so on… The new S or D must also be numbered S1, D1, etc.

9. The resulting change in P and Q are represented
Example:
increase
in supply P S S1 P Q P1 D Q1 Q
The resulting change in P and Q are represented
by Q1 and P1, if there is more than one they are
Q2 and P2 and so on… The new S or D must also be numbered S1, D1, etc.

10. Supply
and
Demand
Questions

11. You can use your notes for this
Time For Practice Questions
You can use your notes for this

12. For each question you will need to:
1. Start with a base supply & demand graph
2. Read the question
Pepsi
The price of Coca Cola doubles, what happens to the market for Pepsi?
3. Label the market
4. Figure out the Shifter
5. Explain: (under graph) shifter, change in S/D,
direction and what happened to P and Q
6. Draw the shift with new curve, P & Q’s
7. Go Around The Horn

13. For each question you will need to:
Pepsi
The price of Coca Cola doubles, what happens to the market for Pepsi?
Price of substitute = D , P ,Q

14. Demand Shifters Supply Shifters 1. # of consumers 1. # of suppliers
2. Y-Normal Goods
2. Physical Availability
3. Y-Inferior Goods
3. Costs
4. P of Substitutes
4. Technology
5. P of Complements
5. Expected Future Prices
6. Expected Future prices
7. Expected Future Y
8. Preferences

15. 1. What happens to the market for oranges when
a sudden and severe frost hits Florida?
Oranges S1 P S
Decrease in
the physical
availability
of resources. P1 P D Q1 Q Q
Your market is:
Oranges

16. 1. What happens to the market for oranges when
a sudden and severe frost hits Florida?
Oranges S1 P S
Decrease in
the physical
availability
of resources. P1 P D Q1 Q Q
Phys Avail = S , P , Q .

17. 2. What happens to the market for CD’s when
the price of CD players goes down?
CD’s P S
Decrease in
the price of
a complement. P1 P D1 D Q Q1 Q
Your market is:
CD’s

18. 2. What happens to the market for CD’s when
the price of CD players goes down?
CD’s P S
Decrease in
the price of
a complement. P1 P D1 D Q Q1 Q
P of Comp = D , P , Q

19. 3. What happens to the market for CD’s when
the royalties paid to the song artist goes up?
CD’s S1 P S
Increase in
costs. P1 P D Q1 Q Q
Your market is:
CD’s

20. 3.What happens to the market for CD’s when
the royalties paid to the song artist goes up?
CD’s S1 P S
Increase in
costs. P1 P D Q1 Q Q
Costs = S , P , Q

21. 4. The U.S. goes through a boom economy, what
happens to the market for steak?
Steak P S
Increase in
incomes—
Normal goods. P1 P D1 D Q Q1 Q
Your market is:
Steak

22. 4. The U.S. goes through a boom economy, what
happens to the market for steak?
Steak P S
Increase in
incomes—
Normal goods. P1 P D1 D Q Q1 Q
Y-Norm Goods = D , P Q

23. 5. The price of milk doubles; what happens to the market for cereal?
related
product—
complement. P P1 D D1 Q1 Q Q
Your market is:
Cereal

24. 5. The price of milk doubles; what happens to the market for cereal?
related
product—
complement. P P1 D D1 Q1 Q Q
P of Comp = D , P , Q

25. 6. The price of airline tickets doubles, what
happens to the market for bus tickets?
Bus Tickets P S
Increase in
price of
related
product—
Substitute P1 P D1 D Q Q1 Q
Your market is:
Bus Tickets

26. 6. The price of airline tickets doubles, what
happens to the market for bus tickets?
Bus Tickets P S
Increase in
price of
related
product—
Substitute P1 P D1 D Q Q1 Q
P- Sub = D ,P ,Q

27. U.S. automakers start using robots instead of
workers to produce its cars, what happens to the
market for U.S. and Foreign automobiles?(2 graphs)

28. 7. U.S. automakers start using robots instead of
workers to produce its cars, what happens to the
market for U.S. and Foreign automobiles?(2 graphs)
The initial change effects the U.S. Auto Market.
The resulting change in price would then effect the foreign
Auto market.

29. The End

30. P
U.S. Autos S S1 P P1 D Q Q1 Q
Techno = S ,P ,Q

31. 5. The price of milk doubles; what happens to the market for cereal?
Foreign Autos P S
Price of
related
product—
Substitute. P P1 D D1 Q1 Q Q
P of Sub = D , P ,Q