2. Economics LAP 11 Supply and Demand

3. Explain the nature of supply and demand. Explain factors that affect supply and demand.

4. Explain the nature of supply and demand.

5. New style of Nikes just came on the market.  Selling for $150 a pair  Customers lining up to buy them  Stores running out so Nike increases production  Then, there are plenty of new Nikes available.

6. The world of supply and demand  What was “hot” yesterday is “not” today.  Impacts you as well as businesses  Goal is to match supply with demand so: You can buy all the shoes you want. Nike can sell all of the shoes it makes.

7. Quantity of a good or service that consumers are ready to buy at a particular price at a particular time

8. Requirements for to exist No money, no demand  Consumers must be willing to exchange buying power. Buy one product instead of another  Consumers must have a desire for a good or service.  Consumers must have the buying power to pay for the good or service. A person might want a $5 espresso, but only have $3. A person who has $5 may prefer to buy a value meal.

9. Requirements for to exist Consumers usually buy more at lower prices, and less at higher prices.  Money has a lot to do with demand.  Law of demand states that the quantity of a good or service that consumers will buy varies inversely with the price of the good or service.

10.  Quantity of a good or service that producers are able and willing to offer for sale at a specified price in a given period of time  Law of supply states that the quantity of a good or service that will be offered for sale varies in direct relation to its selling price.  Money has a lot to do with supply.

11. High Price High Supply  The higher the price, the more producers will supply.

12.  The lower the price, the less producers will supply. Low Price Low Supply

13.  Law of supply and demand states that the supply of a good or service will increase when the demand is great and decrease when demand is low. Laws of togetherand High Demand Supply Increases Low Demand Supply Decreases  Goal is to achieve equilibrium—the point at which the quantity supplied equals the quantity demanded

14.  Buyer’s market Price is low because there is a large supply and a small demand. Best time for consumers to buy Buyer’s Market Large Supply Small Demand Lower Prices

15.  Seller’s market Prices are high because quantity demanded is much greater than quantity supplied. Best time for producers to sell Seller’s Market Small Supply Large Demand Higher Prices

16.  Elastic demand —demand changes when prices change. Usually affects luxury items or extras

17.  Inelastic demand —demand remains constant even if prices change. Usually for necessities needed to survive

18. Explain factors that affect supply and demand.

19. Utility Utility Usefulness to a potential consumer Often depends on age, gender, occupation, education, income External influences have an impact. Car insurance Gasoline

20. Buying Power Amount of money available

21. Price of other goods Substitute products: satisfy the same needs Complementary products: are used together Ski lift tickets

22. Consumers Standard of living Number of people in certain groups Expectations

23. Cost of production  High costs, less production  Decreased costs, more production Number of producers  More producers equals more supply.

24. Future prices  Sellers might keep products off the market to wait for higher prices. Disasters and emergencies  Often reduce supply and increase prices

25. Government  Rules, regulations, taxes may reduce supply. Technology  Leads to lower production costs and more supply  Eliminated some products

26. Consider all of the products that are available to buy.  Why do you buy certain brands of necessities?  Why do you buy luxury items?  What is the difference?

27.  Weather service predicts a blizzard. Great demand for a limited amount of supplies Only grocery store in one small town increases prices Ethical to raise prices in all situations?

28. Acknowledgments Original Developers: Lelia Ventling and Lynn Malowney, MarkED Version 1.0 Copyright  2008 MarkED Resource Center

29. LIQUID LIBRARY Various images used in this presentation are © 2004 Liquid Library. All rights reserved http:www.liquidlibrary.com Digital-based photography sources: MICROSOFT CLIP GALLERY LIVE Various clipart used in conjunction with  PowerPoint 2000 ®,  Microsoft ® All rights reserved One Microsoft Way Redmond, WA 98052-6399 USA

30. Copyright: All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.