1. D EMAND AND S UPPLY Revisited Along with elasticity, shifters, equilibrium & disequilibrium

2. T HE L AW OF D EMAND Quantity demanded price 030 525 1020 15 2010 255 300 QD P

3. A S THE P RICE FOR A GOOD OR SERVICE INCREASES, THE Q UANTITY D EMANDED D ECREASES E XAMPLE C ANDY A UCTION All of the Prices paired with the Quantities Demanded = Demand Price can only indicate a change in the quantity demanded– It cannot change Demand Only Six (6)things can change Demand ▲ Income, ▲Population, ▲Tastes & Preferences ▲Consumer Expectations, ▲Price of Substitutes ▲Price of Complements

4. C HANGE IN D EMAND What could change this graph?

5. E LASTICITY OF D EMAND : W HAT M AKES THE S LOPE OF THE L INE CHANGE ? Elastic Inelastic How sensitive to a change in price is the change in the quantity demanded?

6. T HE L AW OF S UPPLY Quantity Supplied price 00 55 10 15 20 25 30 QS P

7. A S THE PRICE FOR A GOOD OR SERVICE INCREASES, THE QUANTITY SUPPLIED ALSO INCREASES PQ All of the Prices paired with the Quantities Supplied = Supply Price can only indicate a change in the quantity supplied– It cannot change Supply Only Six (6) things can change Supply ▲ Cost of Inputs, ▲# of Producers, ▲Producer Expectations, ▲Technology ▲Government Policy, ▲Natural Events/Disasters

8. H OW DO YOU K NOW WHEN THE P RICE IS R IGHT ? Equilibrium QD & QS Intersect at the Same Price. Equilibrium point

9. P RICE C ONTROLS =G OVERNMENT I NVOLVEMENT Price Floor = price set above Equilibrium Surplus Shortage Price Ceiling = Price set below Equilibrium