1. DEMAND – SUPPLY

2. The Law of Demand
Holding all relevant factors constant – quantity demanded is an inverse function of price.
NOTE Terminology
This THE MOST powerful propostiton in economics

3. Demand
(own) Price
Ceteris Paribus Conditions

4. Ceteris paribus Conditions
Tastes (can’t explain where they come from) Let others do this.
For economists tastes are unexplained
Income – normal goods/inferior goods
Prices of Other Goods – substitutes and compliments – the movement explains the relationship.
Expectations – but this can be a trap – be careful – like tastes can be used to explain anything
Size of the market – numbers

5. Terminology Terminology is critical Changes in Quantity Demanded
Changes in Demand

6. Changes in Demand Intuitive Forecasting Do this for your business
It will make you richer

7. Supply – no law of supply
(own) Price
Ceteris Paribus Conditions

8. Ceteris Paribus Conditions
Price of Factors – this creates rising marginal costs – more later
The level of Technology
Natural Disruptions
Number of Firms in market
Expectations

9. Terminology Again – but consistant terminology
Changes in quantity supplied
Changesin supply

10. Changes in Supply
Intuitive Forecasting
Do this for your business

11. MARKETS Put Supply & Demand Together Changes in Supply
Changes in Demand
Think institutive forecasting for your business

12. A Theory of Price Formation
Return to Equilibrium
Changes
Movements

13. Government Intervention
Price floors
Price ceilings

14. Issues Why a bountiful harvest is not good for farmers!!!
Energy crises in California
Free College
Rent Control

15. TERMINOLOGY Changes in quantity demanded
Caused by changes in own price represented by a movement along a given demand curve
Changes on Demand
Caused by changes in ceteris paribus conditions – represented by a shift in the entire demand curve

16. What Happens if both Supply and Demand Change
Airline Safety Regulations
Raise Cost – decrease supply
Safer travel – more demand

17. Utility – Maximization
Proof that demand curve has a negative slope

18. Consumer Surplus
“Extra Satisfaction for some consumers