# The Market Supply and Demand Together Reference 5.1.

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The Market Supply and Demand Together Reference 5.1

Use supply and demand curves to understand how price is set. Consider a supply and demand curve on one graph. Consider e-bay and how price is set by bidders Consider an imaginary commodities market.

Review: On a graph, the point where supply and demand intersect is called equilibrium Equilibrium in a market exists when the quantity of a good demanded is equal to the quantity of a good supplied. That point is the equilibrium price A change in equilibrium price can be brought about by changes in supply and/or demand.

Review When there is a greater quantity demanded than quantity supplied = shortage When there is a greater quantity supplied than quantity demanded = surplus MARKETS MOVE TO EQUILIBRIUMMARKETS MOVE TO EQUILIBRIUM A change in equilibrium price can be brought about by changes in supply and/or demand.

What could cause a decrease in supply? What happened to price?

What could cause a decrease in demand? What happened to price?

What could cause an increase in supply? What happened to price?

What could cause an increase in demand? What happened to price?

Practice Time For each of the following scenarios, draw and write what would happen to supply, demand, equilibrium price and equilibrium quantity. Explain the reason. –A company that makes cables for computer networks invents a way to lower the cost of making their cables. –A very flashy ad campaign for little-known brand of ice tea increases its popularity among consumers. The company is ready to make any amount of iced tea necessary to satisfy changes in demand. –With significantly cheaper prices for computers, more people can buy computers. What might happen to the market for Internet service? –Gas prices start to increase dramatically. What happens to the market for SUVs that get bad gas mileage?

What happens when both Supply and Demand Shift?

Double Shifts S  > D  = P  D  > S  = P  D  > S  = P  S  > D  = P  D  = S  = P constant D  = S  = P constant

True or False? When quantity supplied is greater than quantity demanded, a surplus exists. A shortage occurs when quantity demanded is greater than quantity supplied. If price is too high, there is a surplus; if price is too low, there is a shortage. The supply of goods on hand is inventory.

Review 1.If demand increases and supply is constant what happens to equilibrium price? 2.If supply decreases and demand is constant, what happens to equilibrium price? 3.If supply increases and demand is constant, what happens to price? 4.If the shortage is 40 units and the quantity supplied is 533 units, what is the quantity demanded? 5.If supply decreases by more than demand decreases, what happens to equilibrium price?

Graph the following: A.Demand increases in a market B.Supply decreases in a market C.Demand decreases in a market D.Demand decreases by more than supply increases in a market

Homework: Read and note parts of Chapter 5.2: –P. 129 “Trying Out for a HS Sport” –P. 130 “GPA, SAT Scores, and College” –P. 131 “Necessary Conditions…” Read and complete Question To Answer –P. 121 “How a Meeting in Vienna…” –P. 123 “ The California Gold Rush” –P. 127 “ How Might Highway Tolls…” Prepare for Unit 3 Quiz (Ch3-5) Date TBA