20 Changes in demand vs. changes in quantity demanded Changes in quantity demanded only caused by changes in the products own price, a movement along a demand curve Changes in demand--a shift in the demand curve caused by factors other than the price of the product
21 P P Q Q D D1 A change in demand A change in quantity demanded D P1 P2 Q1Q2
22 Do you understand? Do you really understand?????
23 Which of the following would increase the current demand for cd’s? a. A decrease in the price of cd’s b.A decline in the teenage population c.A lower cost for producing cd’s d.An expectation of a drop in cd prices e.A decrease in the price of cd players The correct answer is…….E
24 1. According to the "Law of Demand," as the price of a good increases a. the demand for the good increases. b. the demand for the good decreases. c. the quantity demanded increases. d. the quantity demanded decreases. 2. Tea and Coffee are ____________. Peanut butter and jelly are ____________. a. complements; substitutes b. complements; complements c. substitutes; complements d. substitutes; substitutes
25 3. Which of the following will increase the demand for pencils? a. a decrease in the price b. a decrease in the student population c. a decrease in the price of pens d. a decrease in the price of erasers
26 The supply side of the market Supply refers to willingness and ability to produce something
27 The Law of Supply As price rises, the quantity supplied rises, cet. par.
28 Reasons for the Law of Supply? Monetary incentives The Law of Increasing Opportunity Costs
41 Changes in supply vs. changes in quantity supplied Changes in quantity supplied only caused by changes in the products own price, a movement along a supply curve Changes in supply--a shift in the supply curve caused by factors other than the price of the product
42 P P Q Q A change in supply A change in quantity supplied P2 P1 Q1Q2 S S1S
43 Supply and demand together Put supply and demand curves on the same graph Intersection gives the equilibrium price and quantity
44 D S Price Quantity PEPE QEQE P E and Q E represent the equilibrium price and quantity
60 If both curves shift, can predict price or quantity, but not both unless the magnitude of the shifts are known
61 Examples: shifts in both S and D curves Say both S and D increase, what can we say about equilibrium P and Q?
62 Q will increase, but P is indeterminate ANSWER
63 Examples: shifts in both S and D curves Say S increases but D decreases, what can we say about equilibrium P and Q?
64 P will decrease, but Q is indeterminate ANSWER:
65 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 are shortages and surpluses? What happens when demand and supply curves shift?What happens when demand and supply curves shift?
66 Supply and demand problems Suppose apples and oranges are substitutes to consumers: Bad weather destroys many apple orchards--what happens to equilibrium price and quantity in the apple market? In the Orange market?? Illustrate graphically.
67 PP Q Q S S1 D D1 P1 P2 Q1Q2 Apple market, supply decreases, price rises, quantity falls D S Orange market, demand increases, price and quantity rise P1 P2 Q1Q2
68 Oprah Winfrey says on tv that she will never eat another hamburger. What might happen to the equilibrium price and quantity in the beef market? Show graphically with supply and demand curves.
69 S1 D1 Decrease in demand in the beef market, price and quantity fall D2 P2 Q2 P1 Q1 69
70 The demand for computers has clearly increased over time, due to higher incomes and changing preferences towards computers. Despite the increased demand, the price of computers has continued to fall. Show graphically with supply and demand curves how this could happen, and give some possible explanations.
71 S S1 D D1 P1 P2 P3 If supply increases more than demand, price falls--greater supply due possibly to lower input costs, better technology, more firms
72 An increase in the wages paid to fishermen will have what effect on the fish market equilibrium? a. Price will decrease, and quantity will decrease. b. Price will increase, and quantity will increase. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will decrease. e. Price and quantity will stay the same.
73 Over the past couple of years, prices for personal computers have fallen dramatically, but suppliers have offered more and more of them for sale. Does this refute the law of supply? Explain.