Supply and Demand

What are demand and supply, and

what are factors that influence
them?
 5.2 How do Demand and Price
interact?
 Demand is what people are willing and
able to buy at various prices
 Quantity demanded is a specific amount
an individual is willing and able to buy at a
given price
– A demand schedule is a table that shows the
quantity demanded at each price
 5.2 How do Demand and Price
interact?
 When the data from the demand schedule
is graphed, the result is a demand curve
 5.2 How do Demand and Price
interact?
 The law of demand Price in $ Quantity
states that as prices (y-axis) Demanded
increases, the 5 10
quantity demanded
4 15
for a good or service
decreases, and vice 3 22
versa
 Graph the following 2 30
points in your notes:
1 35
 5.3 What can cause demand to
shift?
 Factors other than price can cause the entire demand
curve to shift
 This is called a change in demand
 These factors, called demand shifters, include changes
in:
– consumer income
– the number of consumers
– Consumer tastes and preferences
– Consumer expectations
– Price of substitute goods (replacement product)
– Price of complementary goods (something consumed with a
product)
 PRICE IS NOT A SHIFTER
 5.3 What can cause demand to
shift?
 Price is NEVER a shifter for a demand
curve, because if we change the price, we
simply move to a new point on the curve
and have a new quantity demanded
 5.4 How do supply and price
interact?
 Supply is what producers are will and able
to supply at various prices
 Quantity supplied is the quantity
producers are willing and able to supply at
a specific price
– A supply schedule is a table that shows the
quantity that
 5.4 How do supply and price
interact?
 Supply is what producers are will and able
to supply at various prices
 Quantity supplied is the quantity
producers are willing and able to supply at
a specific price
– A supply schedule is a table that shows the
quantity that
 5.4 How do supply and price
interact?
 When the data
are graphed,
the result is a
supply curve
 5.4 How do supply and price
interact?
 The law of supply Price in $ Quantity
says that as price (y-axis) Supplied
rises, the quantity
supplied for a good or 5 35
service also
increased, and vice 4 30
versa
 Graph the following 3 22
points in your notes
on the demand graph 2 15
you created earlier
1 10
 5.5 What can cause supply to
change?
 Factors other than price can cause an entire
supply curve to shift
 This is called a change in supply
 These factors, called supply shifters, include
changes in
– cost of inputs
– The number of producers
– Conditions due to natural disasters or major events
– Technology
– Producer expectation
– Government policy
 5.6 What is demand elasticity?
What factors influence it?
 Demand elasticity is the degree to which
the quantity demanded changes in
response to a change in price
 Factors that influence demand elasticity
are:
– Availability of substitutes
– Price relative to income
– Necessities versus luxuries
– Time needed to adjust to price change
5.7 What is supply elasticity? What
factors influence it?
 Elasticity of supply measures the sensitivity of
producers to a change in price
 If supply is elastic, producers will increase
supply significantly, even for a small increase in
price
 If supply is inelastic, producers cannot easily
increase supply even for a big change in price
 Factors that influence supply elasticity are:
– Availability and mobility of inputs
– Storage capacity
– Time needed to adjust to a price change