2. 1 Chapter 3 Demand and Supply

3. 2 What is the Law of Demand? When price increases the quantity demanded decreases

4. 3 What is a Demand Schedule? Shows the specific quantity of a good or service that people are willing and able to buy at different prices

5. 4 Price Quantity Demanded $10 0 $9 1 $8 2 $7 3 $6 4 $5 5

6. 5 What is a Demand Curve? Graphically depicts the relationship between price and quantity demanded

7. D e m a n d C u r v e P1 Q1 P2 Q2 Price Quantity

8. Individual Demand Curves for Fish Claudia’s Demand for Fish 7 0 12345678 9 1 2 3 4 5 6 8 10 9

9. Individual Demand Curves for Fish Chris’s Demand for Fish 7 0 12345678 9 1 2 3 4 5 6 8 10 9

10. 9 What is Market Demand? The horizontal sum of all individual demands in a market

11. Market Demand Curve: Individual 1 P1P1 Q1Q1 Individual 2 P1P1 Q2Q2 Market Demand P1P1 Q 1 +Q 2 P2P2

12. 11 Price Quantity 7 0 12345678 9 1 2 3 4 5 6 8 0 12345678 9 1 2 3 4 5 7 8 6 Market Demand Curve Claudia’s Demand Chris’s Demand 10 9 9

13. 12 Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market Demand Curve 10 9

14. Gottheil 2e Comprehensive (Exhibit 3.1), Micro (Exhibit 3.1), Macro (Exhibit 3.1) ©2000 South-Western College Publishing Individual Demand Curves for Fish 8

15. Gottheil 2e Comprehensive (Exhibit 3.2), Micro (Exhibit 3.2), Macro (Exhibit 3.2) ©2000 South-Western College Publishing The Market Demand Curve 9

16. 15 What is a Supply Schedule? Shows the specific quantity of a good or service that suppliers are willing and able to provide at different prices

17. Price Quantity Supplied $5 0 $6 1 $7 2 $8 3 $9 4 $10 5

18. 17 What is a Supply Curve? Depicts the relationship between price and quantity supplied

19. Supply Curve Supply Curve P1 Q1 P2 Q2 Price Quantity S

20. 19 What is Market-Day Supply? A market situation in which the quantity of a good supplied is fixed, regardless of price

21. Market-Day Supply Curve for Fish Supply Schedule for Fish for the Market-Day 7 0 12345678 9 1 2 3 4 5 6 8 10 9 Quantity (1,000) Price

22. Supply Curve Supply Curve S P1 Q P2 21

23. Market Demand Curve for Fish Demand Schedule & Curve for Fish: 7 0 12345678 9 1 2 3 4 5 6 8 10 9 Quantity (1,000) Price Excess Supply Excess Demand Equilibrium

24. 23 What is Equilibrium Price? The price that equates the quantity demanded and the quantity supplied

25. 24 Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market-Day, Short-Run and Long-Run Supply 10 9 Market-Day Supply Short-Run Supply Long-Run Supply

26. Short-Run: The time interval during which suppliers are able to change the quantity of some but not all the resources they use to produce goods and services. Long-Run: The time interval during which suppliers are able to change the quantity of all the resources they use to produce goods and services.

27. D S P3 Q3 P1 Surplus P2 Shortage 26 Or Excess Supply Or Excess Demand

28. Fish Market with change in Demand:

29. 28 Price Quantity 0 12345678 9 1 2 3 4 5 6 7 8 Market Demand Curve 10 9 S D

30. Fish Market with change in Demand:

31. 30 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand: 10 9 S D D'

32. Fish Market with change in Demand:

33. 32 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Decrease in Demand: 10 9 S D D"

34. Change in Quantity Demanded: A change in quantity demanded of a good that is caused solely by a change in the price of that good. Change in Demand: A change in quantity demanded of a good that is caused by factors other than the price of that good.

35. Factors that cause changes in Demand:  Changes in Income.  Changes in Taste.  Changes in the Prices of Other Goods.

36. Substitute Goods: Goods that can replace each other. When the price of one increases (decreases), the demand for the other increases (decreases). Complementary Goods: Goods that are generally used together. When the price of one increases (decreases), the demand for the other decreases (increases)

37. Factors that cause changes in Demand:  Changes in Income.  Changes in Taste.  Changes in the Prices of Other Goods.  Changes in the expectations about future prices.  Changes in the population size.

38. Quantity Price 0 P1P1 P2P2 Q1Q1 Q2Q2 Change in Quantity Demanded

39. Quantity Price 0 P1P1 Q1Q1 Q2Q2 Change in Demand D D1D1

40. Fish Market with change in Supply:

41. 40 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Supply: 10 9 S D S'

42. Factors that cause changes in Supply:  Changes in Technology.  Changes in Resource Price.  Changes in the Prices of Other Goods.  Changes in the Number of Suppliers.

43. 42 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

44. 43 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

45. 44 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Supply: 10 9 S D S' D'

46. 45 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'

47. 46 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'

48. 47 Price Quantity (1,000s) 0 12345678 9 1 2 3 4 5 6 7 8 Increase in Demand & Decrease in Supply: 10 9 S D S' D'