1. Basic Principles Day 3 Supply and Demand
Civics
Mr. Hensley
SRMHS

2. Chapter 3 Table 3.1

3. Chapter 3 Figure 3.1

4. The Law of Demand: Why is the Demand Curve Downward-sloping?
The Income Effect
as the price rises given your income
you can only afford to buy less
as the price falls given your income
you can afford to buy more
The Substitution Effect
As the price rises, buyers switch to relatively cheaper goods
As the price falls, buyers switch away from other, relatively more expensive goods

5. Chapter 3 Table 3.2

6. Chapter 3 Figure 3.2

7. Determinants of Demand (5)
Tastes & Preferences
Consumer Income
Normal v. Inferior Goods
Number of Consumers
Consumer Expectations (of future price changes or availability)
Prices of Related Goods & Services
Substitutes
Complements
Mnemonic: TINER

8. Chapter 3 Figure 3.3

9. Chapter 3 Table 3.4

10. Chapter 3 Table 3.5

11. Chapter 3 Figure 3.4

12. The Law of Supply: Why is the Supply Curve Upward-sloping?
Marginal costs of production rise as more is produced
When producers make more output, they need more inputs
Land
Labor
Capital
Entrepreneurship
Producers bid up the price of these inputs by using more
and must pass on the higher cost to consumers

13. Determinants of Supply (6)
Production Technology
Input Prices (Factor or Resource Prices)
Number of Suppliers
Taxes and/or Subsidies
Producer Expectations
Prices of Related Goods & Services
Substitutes in Production/Switching Outputs
Complements in Production/Byproducts
Mnemonic: TINTER

14. Chapter 3 Table 3.7

15. Chapter 3 Figure 3.5

16. Chapter 3 Figure 3.7
A Price Ceiling

17. Chapter 3 Figure 3.8
A Price Floor

18. Supply and Demand Determinants: Relationships
Determinants of Demand
Tastes and Preferences
Income
Number of Consumers
Consumer Expectations
Prices of Related Goods and Services
Determinants of Supply
Technology
Input Costs
Number of Producers
Producer Expectations
Prices of Related Goods and Services
Taxes & Subsidies