1. Why an iPhone X costs more than an iPhone 8…
Unit 2 – Markets, Supply, Demand, and Price
Supply and Demand
Why an iPhone X costs more than an iPhone 8…
Day 2

2. Objectives
Define “Supply and Demand” and how price affects each
Terms:
Supply
Demand
Understand the Law of Supply and Law of Demand
Equilibrium Price
Shortage
Surplus
Identify problems when equilibrium price isn’t met

3. Remind me… What is price? How is that different from cost?
And what is the point of money?
What did those cookies have to do with anything?
Today we look at how those are affected by Supply and Demand…

4. Supply and Demand SUPPLY DEMAND
The willingness to SELL specific quantities of a good at different prices at a given time
NOT the quantity you have on hand
DEMAND
The willingness to BUY specific quantities of a good at different prices at a given time
NOT just having a “want”

6. What happened with the hot dogs?
What does that teach us about the SUPPLY?

8. The Law of Supply
The Quantity of a good Produced increases as its price increases
There is a POSITIVE relationship between price and quantity

9. What happened with the hot dogs?
What does that teach us about the DEMAND?

11. The Law of Demand
The Quantity of a good Demanded increases as its price decreases
There is a NEGATIVE relationship between price and quantity

14. So we have two “curves”…
The point where they intersect is called…
Equilibrium Price
The price at which the quantity of a good demanded equals the quantity supplied
Does NOT necessarily mean maximum profit
What is the amount for our hot dogs?

15. Dangerous Curves Ahead…
What if I DON’T match quantity…
Market Shortage
Sellers supply LESS than the quantity demanded at that price
Market Surplus
Sellers supply MORE than the quantity demanded at that price

16. Is that all?
In a much later unit, we will discuss how governments sometimes mess with these curves as well. When we create price ceilings or price floors, we can prevent equilibrium
Is there any time we’d WANT that?

17. Review What happens to the SUPPLY as the price increases?
What happened to the DEMAND as the price increases?
What could I do if I have a shortage?
What could I do if I have a surplus?

18. Objectives
Define “Supply and Demand” and how price affects each
Terms:
Supply
Demand
Understand the Law of Supply and Law of Demand
Equilibrium Price
Shortage
Surplus
Identify problems when equilibrium price isn’t met