Essential Question What are demand and supply and what factors influence them Demand and price Demand comes at a price Burger Quantity demanded amount of a goodservice consumers are willing to pay ID: 725025
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Slide1
Demand and Supply
Unit 5
Essential Question:
What are demand and supply, and what factors influence them?Slide2
Demand and price
Demand comes at a price.
Burger
Quantity demanded – amount of a good/service consumers are willing to pay at a price. This is always due to a price change. You slide along the curve.Law of Demand – inverse relationship between price and demandLaw of diminishing marginal utility – adding one more gives less each time (enough is enough)Income effect – your $ is limitedSubstitution effect – you’ll buy similar items (like white/wheat bread)Slide3
Change in demand
AKA “
Shift in demand
” (AKA “Change in demand”)This differs from “Change in quantity demanded”What’s the diff?“Change in quantity demanded” slide along the Demand curve This is always due to a price change.
“Change/shift in demand”
draw a
whole new Demand curve This is due to reasons other than price change.Slide4
Causes of “Change/shift in demand”
Anything EXCEPT price change. With these, a new Demand curve is drawn.
A change in…
Income – we can buy more or lessNumber of consumers – this means more or less buyersConsumer preferences – soda not as popular nowadaysConsumer expectations – maybe you expect prices to changePrice of substitute goods – potato chips go up in price, Cheetos sales will likely go upPrice of complementary goods – price of hot dogs go up, fewer sales in hot dog bunsSlide5
Supply and price
Supply
– amount of good/service producers are willing to sell at a price
Law of supply – direct relationship between price and quantity supplied (as price increases, quantity supplied increases)Change in quantity suppliedYou slide along the Supply curveIt’s always due to priceThis is different from a change in supply…Slide6
Change/shift in supply
Change in supply
means…
You draw a new curve Due to anything other than price changeMaybe caused by change in…Cost of inputsNumber of producersConditions (natural disaster, politics)TechnologyProducer expectationsGovernment policySlide7
Elasticity
Elasticity
– how sensitive a product is to price changes
Formula: demand elasticity = % change in quantity demanded / % change in priceSlide8
Elasticity (cont.)