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4 Demand
In order to have demand..
Law of Demand
Marginal Utility
Or
Demand Schedule
Price
Slices
1.00
2.50
4.00
Demand
Quantity Demanded
Price
going
down
Price
going up
Determinants of Demand (factors that shift the demand curve left or right)
Factors affecting how much people will buy of any product at a particular
price.
_______________________________
__________________
____________________________________________
____________________________
____________________________
Expectations
Demand
Demand
Income
Compliments
Goods that are bought and used ________________________.
A price change of one complementary good can affect the demand
for the other.
Substitutes
Goods that are used in place of one another:
A price change of a substitute can affect the demand for the other.
Butter or ______________.
Coke or P________.
Hotdogs or ________________________
Right
Reason: ________________
Example 2
You run a video rental store and UGA Students have just left for the summer.
Demand for: ______________________
Quantity Demand
Increases
Decreases
Curve Shift
Left
Right
Reason: ________________
Example 3
A hurricane is about to hit Texas and wipe out oil refineries in the Gulf of Mexico.
The market is gasoline?
Demand for? ________________
Quantity Demand (price change)
Increases
Decreases
Curve Shift
Left
Right
Reason:_________________
Example 4:
Draw a demand curve for music downloads. What happens to it in each of
the following scenarios? Why?
A.
B.
C.
A.
B.
C.
Elasticity
Inelastic Goods
Very few ________________________
Necessity or ________________________
Strong brand loyalty
Usually not too expensive (rare purchases)
Elastic Goods
Unit Elastic
Examples:
Types of food
Types of clothing
gasoline
Perfectly Elastic
Perfectly Inelastic
medical products
insulin
Quantity Supplied
The amount a supplier is willing and able to supply at that certain price. (a
specific quantity)
Draw Curve
Price
Slices
1.00
2.75
4.00
Slices
192
435
680
1.00
2.75
4.00
Supply Curve
Always rises from left to right.
Like climbing a hill.
Individual Supply Curve
Supply
43 Curve
21
Shift
200
400
600
Right
Supply
$432 Curve
1200
Shift
400
600
Left
Factors that shift the Supply Curve ( increase or decrease of a good at all
possible prices)
________________________________________
________________________________
________________________________
_____________________________
_______________________
_______________________________
_______________________________
# of Firms selling (also called Number of sellers)
Firms entering or exiting the marketplace will affect the supply for most
products.
An increase in firms will __________________ supply.
A decrease in firms will ___________________ supply.
Example: Market is Pizza. Two new pizza places open in Cumming. (Two
firms enter the market). What happens to the supply of pizza?
Draw curve with shift.
Input Costs
Q
Any ____________ that goes into making a good
Two types of costs
_____________Costs ( rent ect.)
___________________ Costs ( cost of resources used ect.)
As costs go up for your business (input costs), supply will decrease (shift left)
As cost go down for your business (input costs), supply will increase (shift
right)
Market is Pizza. Flour prices increase and it now costs more to produce
pizza. What happens to the supply of pizza?
Draw graph with movement.
Technology
Advances in technology always cause an ________________________ in supply.
New improved pizza oven will ____________________ production of pizza..
New improved machines produce goods faster than previously..
Market is Pizza. A new crust maker allows 1 employee to make twice as many
pizzas as before in the same amount of time.
Draw supply curve movement..
Subsidies
Government __________________ to producer
Often subsidies are offered to enable firms to offer goods at a certain price.
Example - ____________________________________, offset the losses for
farmers when they sell their farming products at a very cheap price
Examples: Milk, Corn
The government pays dairy farmers $.25 for every gallon of milk they
produce.
Draw curve movement
Taxes
Taxes usually make things more expensive for a business.
Examples: Taxes on resources used to make a product, taxes placed on start
up costs ect
The market is Ford Vehicles. The government adds a new tax on all
foreign steel, including that used by Ford for their vehicles. What
happens to the supply of Ford Vehicles?
Draw Curve Shift.
Regulations
Regulations affect how goods are produced or what they are made out of.
Often result in an ______________________ in costs and a
____________________________ in supply.
Examples:
-_________ (Environmental Protection Agency)
-Gas Mileage on cars
-Regulations on pollution.
The market is U.S. made cars. A new law states by 2017 all cars and
trucks must have a minimum gas mileage of 25mpg. What happens to
the supply of U.S. cars?
Draw Curve Shift
Expectations (Future Price Expectations)
What business owners expect to happen in the future will affect supply today.
(Future Expectations)
For consumers (demand) & Suppliers (supply)
Market is homes for sale. You and many other home owners are thinking of selling.
Economists predict that home values will increase dramatically after the next 6
months. What happens to homes on the market 7 months from now?
Draw graph with curve shift.
Elasticity of Supply
Elasticity of Supply
Supply is _______________________in the short run. In the short term little
change is possible.
Draw short run supply curve
Products that can be made very easily generally are more _____________
Example: paper clips
Products that are difficult or time consuming to make, generally are more
_____________
Example: airplanes
Supply Practice
The market is electricity. The price of electricity rises. (Draw graph)
The market is pizza. The price of electricity rises. You own a pizza shop.
(Draw graph)
Market is cell phones. Reports link cell phone use to cancer the US government
requires all cell phone companies to do extensive testing on all their cell phones.
(Draw curve)
The market is polio vaccines. The company who makes the Polio Vaccine gets a
subsidy from the US government to keep making it. (Draw curve)