1. SUPPLY & DEMAND 4.1 - 4.2 & 5.1 - 5.2

2. Demand The ____________ of any good is the amount of the good that buyers are willing and able to purchase at a certain price. The ____________ of any good is the amount of the good that buyers are willing and able to purchase at a certain price. ____________ is the want for a product or service. ____________ is the want for a product or service. ____________: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal ____________: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal Demand is from the ___________ perspective! Demand is from the ___________ perspective! quantity demanded DEMAND Law of demand BUYERS

3. LAW OF _____________ in simpler words…. When something is cheaper, people buy ___________ of it. When something is cheaper, people buy ___________ of it. When something is more expensive, people buy ___________ of it. When something is more expensive, people buy ___________ of it. DEMAND MORE LESS EXAMPLES When BIG MACS are TWO for TWO…people tend to purchase more BIG MACS when they visit McDonalds When the PS3 came down in price from $799 to $299, they sold more

4. The Law of Demand in PICTURE form

5. (P) Price of Lattes (Q)Quantity of Lattes Zakk’s Demand Schedule & Curve Price of lattes Quantity of lattes demanded $0.0016 1.0014 2.0012 3.0010 4.008 5.006 6.004 Schedule Curve D

6. !!! REMEMBER !!! A demand curve or schedule graphically define the LAW OF DEMAND A demand curve or schedule graphically define the LAW OF DEMAND A demand curve line SWOOPS DOWN TO THE GROUND like a crashing plane A demand curve line SWOOPS DOWN TO THE GROUND like a crashing plane A demand graph ONLY shows us how PRICE affects our demand for products and services!!! A demand graph ONLY shows us how PRICE affects our demand for products and services!!!

7. CLASS DISCUSION #1 When you purchase something, what are THREE things you consider before you purchase it OTHER THAN PRICE? When you purchase something, what are THREE things you consider before you purchase it OTHER THAN PRICE? EXAMPLES Color Quality Is it comfortable or do I look good in this Is it popular Brand Name Value (do I get a lot for the money) How much use am I going to get out of it Taste

8. Demand Curve Shifters The demand curve shows how price affects quantity demanded, other things being equal. The demand curve shows how price affects quantity demanded, other things being equal. These “other things” are non-price determinants of demand (i.e., things that determine buyers’ demand for a good, other than the good’s price). These “other things” are non-price determinants of demand (i.e., things that determine buyers’ demand for a good, other than the good’s price). Changes in them shift the D curve… Changes in them shift the D curve… Things that have POSITIVE affects on Demand will shift the line RIGHT Things that have POSITIVE affects on Demand will shift the line RIGHT Things that have NEGATIVE affects on Demand will shift the line LEFT Things that have NEGATIVE affects on Demand will shift the line LEFT

9. P Q Suppose the number of buyers increases. Then, at each P, Q d will increase (by 5 in this example). Example of Demand Curve Shift: D2

10. Things that affect (shift) DEMAND other than price levels # of buyers # of buyers Change in people’s income Change in people’s income Prices of related goods (ie peanut butter and jelly) Prices of related goods (ie peanut butter and jelly) Fads or Popularity Fads or Popularity Future Expectations Future Expectations

11. CLASS DISCUSSION #2 Which way will DEMAND shift for PIZZA if 10,000 more people move to Shelby Township? Which way will DEMAND shift for PIZZA if 10,000 more people move to Shelby Township? Which way will DEMAND shift for ABERCROMBIE clothes if people find out they give you body rashes? Which way will DEMAND shift for ABERCROMBIE clothes if people find out they give you body rashes? Which way will DEMAND shift for MUSTARD if it is proven to cure CANCER? Which way will DEMAND shift for MUSTARD if it is proven to cure CANCER? Which way will DEMAND shift for BIG MACS if they come down in price? Which way will DEMAND shift for BIG MACS if they come down in price? !!! REMEMBER!!! DEMAND DOES NOT SHIFT IF THERE IS A CHANGE IN PRICE, RATHER, A CHANGE IN PRICE MOVES YOU ALONG THE CURVE…ONLY NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!

12. Supply The ____________ of any good is the amount that sellers are willing and able to sell at a certain price. The ____________ of any good is the amount that sellers are willing and able to sell at a certain price. ____________ is the amount of a product or service. ____________ is the amount of a product or service. ____________: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal ____________: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal Supply should be studied from the _________ Supply should be studied from the _________ perspective! perspective! quantity supplied SUPPLY Law of Supply SELLERS

13. LAW OF _____________ in simpler words…. When something is cheaper, STORES put ___________ of it on the shelves. When something is cheaper, STORES put ___________ of it on the shelves. When something is more expensive, STORES put ___________ of it on the shelves. When something is more expensive, STORES put ___________ of it on the shelves. SUPPLY LESS MORE EXAMPLES If prices are going up for sunglasses because the demand is increasing in the summer…stores supply more of them. On Black Friday there will be a small supply of cheaply priced Computers however after the Holidays there will be a large supply.

14. The Law of Supply in PICTURE form

15. Starbucks’ Supply Schedule & Curve Price of lattes Quantity of lattes supplied $0.000 1.003 2.006 3.009 4.0012 5.0015 6.0018 P Q Schedule Curve S

16. !!! REMEMBER !!! A supply curve or schedule graphically define the LAW OF SUPPLY A supply curve or schedule graphically define the LAW OF SUPPLY A supply curve line SWOOPS UP TO THE SKY like an airplane taking off A supply curve line SWOOPS UP TO THE SKY like an airplane taking off A supply graph ONLY shows us how PRICE affects the supply of products and services…however…there are other determinants A supply graph ONLY shows us how PRICE affects the supply of products and services…however…there are other determinants

17. CLASS DISCUSION #3 If you are a store owner, what are THREE things you consider before you order goods to put on the shelf OTHER THAN PRICE? If you are a store owner, what are THREE things you consider before you order goods to put on the shelf OTHER THAN PRICE? EXAMPLES Color that is in Quality Is it popular or a fad right now Brand Name popularity Value (Are people going to get a lot for their money) How much people need or want it

18. Supply Curve Shifters The demand curve shows how price affects quantity supplied, other things being equal. The demand curve shows how price affects quantity supplied, other things being equal. These “other things” are non-price determinants of supply (i.e., things that determine sellers’ supply of a good, other than the good’s price). These “other things” are non-price determinants of supply (i.e., things that determine sellers’ supply of a good, other than the good’s price). Changes in them shift the S curve… Changes in them shift the S curve… Things that have POSITIVE affects on Supply will shift the line RIGHT Things that have POSITIVE affects on Supply will shift the line RIGHT Things that have NEGATIVE affects on Supply will shift the line LEFT Things that have NEGATIVE affects on Supply will shift the line LEFT

19. P Q Suppose the price of milk falls. At each price, the quantity of Lattes supplied will increase (by 5 in this example). Example of Supply Curve Shift: S2

20. Things that affect (shift) SUPPLYother than price levels # of sellers # of sellers Change in people’s income Change in people’s income Prices of related goods (ie peanut butter and jelly) Prices of related goods (ie peanut butter and jelly) Fads or Popularity Fads or Popularity Input prices Input prices Technology increases Technology increases

21. CLASS DISCUSSION #4 Which way will SUPPLY shift for PIZZA if 40 more pizza shops open up in Shelby Township? Which way will SUPPLY shift for PIZZA if 40 more pizza shops open up in Shelby Township? Which way will SUPPLY shift for ABERCROMBIE clothes if they are popular right now? Which way will SUPPLY shift for ABERCROMBIE clothes if they are popular right now? Which way will SUPPLY shift for MUSTARD if it is proven to give you CANCER? Which way will SUPPLY shift for MUSTARD if it is proven to give you CANCER? Which way will SUPPLY shift for BIG MACS if they come down in price? Which way will SUPPLY shift for BIG MACS if they come down in price? !!! REMEMBER!!! SUPPLY DOES NOT SHIFT IF THERE IS A CHANGE IN PRICE, RATHER, A CHANGE IN PRICE MOVES YOU ALONG THE CURVE…ONLY NON-PRICE FACTORS MOVE A CURVE LEFT OR RIGHT!!!!!