1. Intro to Business Supply, Demand and Price Target: I can describe how costs and revenues affect profit and supply

2. What Are Costs of Production? COSTS – The money it takes to produce an item – Ex. of inputs costs: labor, raw materials, transportation, energy FIXED COSTS  costs that stay the same no matter how much is produced – Ex. Rent, Salaries, Utilities, Advertising, Insurance, Loans which need to be repaid VARIABLE COSTS  costs that rises or falls depending on the quantity produced – Ex. Raw Materials, Hourly Wages TOTAL COSTS = the sum of fixed + variable costs

3. Price, and Revenue PRICE – is the amount consumers pay for a good/service. REVENUE – The money collected from the sale of goods and services Formula  Revenue = Price * Quantity

4. What is Profit? For businesses, the incentive earn a profit PROFIT = Total Earnings > than a business’s Total Cost Sales > Expenses – Money left over after all the bills are paid The goal  PROFIT by 1.  costs 2.  revenue

5. What Happens to Profit Related to Costs and Price? If the COSTS  and the PRICE remains the same – Profit will  – Ex. The price of cheese goes up; however, the price of the pizza remains the same – Ex. When the cost of lumber goes up, homebuilder profits will fall or the price of houses will go up. If the COSTS  and the PRICE remains the same – Profit will  – Ex. The price of gasoline decreases; however, the price of shipping and handling remains the same

6. What Happens to Profit Related to Revenue and Costs? If REVENUE (sales)  but COSTS remain the same – Profit will  – Ex. Revenue (Sales)  during the Super Bowl; the costs remain the same (advertising, salaries, inputs to make the product/service) If REVENUE (sales)  but COSTS remain the same – Profit will  – Ex. Revenue (Sales)  during a weekend snow storm; however, the expenses (advertising, salaries, utilities) remain the same

7. Relationship Between Profit and Supply SUPPLY refers to the quantity of a good or service that will be brought to market at every price at a given time. – When cost of production , supply will  – When cost of production , supply will  As Profit , Supply  – More businesses will enter the market – Competition will improve the product/service – Businesses will want to keep inventory in stock

8. Unit Supply, Demand and Price Target I can explain 1.Laws of Supply 2.Laws of Demand

9. What is SUPPLY? What is the Law of Supply? Supply the quantity of a good/service that will be brought to the market at every price at a given time The Law of Supply states: producers will  the quantity supplied at higher prices  the quantity supplied at lower prices if everything else remains the same

10. What are the DETERMINANTS of SUPPLY? A change in supply results from: 1) changes in the prices of RESOURCES used to make the good/service 2) changes in the TECHNOLOGY used to make the good/service 3) changes in the NUMBER of SELLERS in a market 4) seller’s expectations of a CHANGE in PRICE

11. SUPPLY Decreased SUPPLY; Effects of higher costs Increased SUPPLY; Advance in Technology DEMAND Non-Price Determinants --

12. What is DEMAND? What is the Law of Demand? Demand is the willingness and ability to buy specific quantities of a good/service at different prices in a specific time period The Law of Demand states: people will buy more of a good or service at  prices less at  prices, if everything else remains the same

13. What are the DETERMINANTS of DEMAND? A change in demand results from: 1.a change in consumers’ incomes 2.a change in consumers’ preferences 3.a change in the prices of related goods or services (complements or substitutes) 4.a change in the number of consumers in a market 5.consumers’ expectations of a change in price

14. Non-Price Determinants of Demand 0 5025 75

15. Supply or Demand?

16. What is the role of prices? How does a price change affect incentives for buyers and sellers? Prices provide a signal to both buyers and sellers. – Ex. Rising oil prices provide an incentive for consumers to drive less – or buy more efficient cars incentive to producers to find more oil – Ex. Rising prices for labor provide an incentive for employers to substitute robots or other technology for labor.

17. I can identify the equilibrium price and how it changes with a shift to either the supply or demand curves Unit Supply, Demand and Price - Target

18. What is a Market? How are Market Prices Determined? A market exists when buyers and sellers exchange goods and services. Market prices are determined through the buying and selling decisions made by buyers (consumers) and sellers (suppliers).

19. What is Equilibrium Price? The equilibrium price of a good or service is the one price at which quantity SUPPLIED Equals quantity DEMANDED Equilibrium price and quantity are revealed on a supply-and-demand graph where the supply and demand curves intersect.

20. What happens When the Price of a Good or Service is Higher or Lower Than the Equilibrium Price? If the price is above the equilibrium price, buyers (consumers) will purchase less than is available, and sellers (suppliers) will offer more; creating a surplus. When a surplus exists, PRICES will  until they reach the equilibrium price. If the price is below the equilibrium price, buyers (consumers) will want to buy more than is available, and suppliers will want to supply less; creating a shortage. When a shortage exists, PRICES will  until they reach the equilibrium price. Buyers will bid the price up until it reaches equilibrium price.

21. What happens to the equilibrium price when one of the determinants of demand or supply changes?

22. Shortages and Surpluses Shortages of a product usually result in price  increases in a market economy Surpluses usually result in price decreases  When one of the determinants of demand or supply changes, the demand or supply curve will shift, resulting in a new equilibrium price and quantity.

23. Price Quantity D D1D1 S What Happens to the Price and Quantity with an INCREASE in Demand? 20 26 $8 $10 0 0

24. Price Quantity D S1S1 S What Happens to the Price and Quantity with an Increase in Supply? 21 $4.75 $6 28 0 0