2. 1 © ©1999 South-Western College Publishing PowerPoint Slides prepared by Ken Long Principles of Economics 2nd edition by Fred M Gottheil

3. 2 Chapter 3 Demand & Supply 12/9/2015 © ©1999 South-Western College Publishing

4. 3 This chapter discusses principles associated with Individual Demand Equilibrium QuantityLong - Run Supply Short - Run SupplyMarket-Day Supply Market DemandEquilibrium Price © ©1999 South-Western College Publishing

5. 4 What assumption is made when a change in quantity is related to a price change? Ceteris paribus © ©1999 South-Western College Publishing

6. 5 What is the Law of Demand? When price increases the quantity demanded decreases © ©1999 South-Western College Publishing

7. 6 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 © ©1999 South-Western College Publishing

8. 7 7 Price Quantity Demanded $10 0 $9 1 $8 2 $7 3 $6 4 $5 5 © ©1999 South-Western College Publishing

9. 8 What is a Demand Curve? Depicts the relationship between price and quantity demanded © ©1999 South-Western College Publishing

10. 9 D e m a n d C u r v e P1 Q1 P2 Q2 9 © ©1999 South-Western College Publishing

11. 10 What is Market Demand? The sum of all individual demands in a market © ©1999 South-Western College Publishing

12. 11 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 © ©1999 South-Western College Publishing

13. 12 12 Price Quantity Supplied $5 0 $6 1 $7 2 $8 3 $9 4 $10 5 © ©1999 South-Western College Publishing

14. 13 What is a Supply Curve? Depicts the relationship between price and quantity supplied © ©1999 South-Western College Publishing

15. 14 S u p p l y C u r v e S P1 Q1 P2 Q2 14 © ©1999 South-Western College Publishing

16. 15 What is Market-Day Supply? A market situation in which the quantity of a good supplied is fixed, regardless of price © ©1999 South-Western College Publishing

17. 16 S u p p l y C u r v e S P1 Q P2 16 © ©1999 South-Western College Publishing

18. 17 S Q D P Excess Supply Excess Demand © ©1999 South-Western College Publishing

19. 18 What is Equilibrium Price? The price that equates the quantity demanded and the quantity supplied © ©1999 South-Western College Publishing

20. 19 D S P3 Q3 P1 Surplus P2 Shortage 19 © ©1999 South-Western College Publishing

21. 20 What is the Short run? The time interval during which suppliers are able to change the quantity of some but not all the resources used © ©1999 South-Western College Publishing

22. 21 What is the Long run? The time interval during which suppliers are able to change the quantity of all resources used © ©1999 South-Western College Publishing

23. 22 What is a change in Demand? A change in the quantity demanded of a good that is caused by factors other than a change in the price of that good © ©1999 South-Western College Publishing

24. 23 Shift in Demand Curve D1 D2 P Q 2323 © ©1999 South-Western College Publishing

25. 24 S1 D1 Decrease in Demand D2 P2 Q2 P1 Q1 24 © ©1999 South-Western College Publishing

26. 25 S D2 P1 Increase in Demand P2 Q2 Q1 D1 25 © ©1999 South-Western College Publishing

27. 26 What causes a shift in Demand? Incomes change Change in population size Price of a related good or service changes Expectations changeChanges in tastes © ©1999 South-Western College Publishing

28. 27 NOTE - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND © ©1999 South-Western College Publishing

29. 28 What is a change in Supply? A change in the quantity supplied of a good that is caused by factors other than a change in the price of that good © ©1999 South-Western College Publishing

30. 29 S1 S2 P Q Shift in Supply 2929 © ©1999 South-Western College Publishing

31. 30 S1 S2 P1 Increase in Supply P2 Q2 Q1 D 3030 © ©1999 South-Western College Publishing

32. 31 S2 S1 P2 Decrease in Supply P1 Q1 Q2 D 3131 © ©1999 South-Western College Publishing

33. 32 What causes a shift in Supply? Change in number of suppliers Change in resource prices Technology change Prices of other goods change Expectations change © ©1999 South-Western College Publishing

34. 33 NOTE - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY © ©1999 South-Western College Publishing

35. 34 What is the sales message in this site? http://www.razzledazzle.com © ©1999 South-Western College Publishing

36. 35 What assumption is always made when the price changes?What assumption is always made when the price changes? What is a Demand Curve? What is a Supply Curve? What is equilibrium Price? What is the Short run? What is the Long run? Long run or Short run?

37. 36 ENDEND © ©1999 South-Western College Publishing