1. Economics – Day 5
9/16/14

2. Do Now: Reading Quiz
Define the following terms complements, inferior good, normal good, substitutes.
The text lists six main factors that shift the demand curve. List 3.
The text lists six main factors that shift the supply curve. List 3.
If the supply of a good increases which way does the supply curve shift?
If the demand of a good decreases which way does the demand curve shift?

3. Review from Last Class
Complements – two goods that go together. When the price of one goes up the demand of the other goes down.
i.e. Hot Dogs and Mustard, Gas and Cars
Inferior Good – a good that people demand less of when their income increases.
i.e. Low quality products (disposable razors example)
Normal Good – a good that people demand more of when their income increases.
New clothing, new car, new phone, new computer, new video game
Substitutes – two goods that compete with each other. When the price of one good goes up, the quantity demanded of the other also goes up.
i.e. coke and pepsi

4. Factors that Shift Demand
Consumer Income
Employment and Unemployment rates
Price of Substitute
Price of Complement
Population (of buyers)
Market Size
Tastes
Future Price Expectations
What buyers expect the future prices of the good will be

5. How to Illustrate the Shift in Demand
When demand increases, at any given price people want to buy more of the good. The demand curve shifts outward and to the right
When demand decreases, at any given price people want to buy less of the good. The demand curve shifts inward to the left

6. Factors that Shift Supply
Technology
Price of Inputs (inputs are things used to produce the goods)
Number of Firms
Price of Substitute Products
Price of Joint Products
Future Price Expectations

7. How to Illustrate the Shift in Supply
An event that increases supply causes the supply curve to shift outward and to the right
An event that decreases supply causes the supply curve to shift inward and to the left

8. Would the demand curve or supply curve shift?
Market
Event
Would the demand curve or supply curve shift?
Would the curve shift to the right or left?
wheat
A drought destroys much of the crop.
Supply
Left
redwood lumber
Environmentalists urge consumers to boycott redwood products.
cigars
A new study shows that smoking cigars results in lots of wrinkles.
butter
The price of margarine goes up.
paper
The price of wood pulp rises.
Hula hoops
Brad Pitt confides to People magazine that "he gets a big kick out of his hula hoop."
yachts
The average price of stocks falls by over 20% between now and the end of the year.
gasoline
Large sports-utility vehicles (like Suburbans and Expeditions) become more popular.
umbrellas
Heavy rain is forecast.
tofu
E. Coli bacteria is found in another meat plant.
Two oil supertankers collide.
hamburger
The price of hamburger rises.
oranges
There's an early frost which destroys much of the crop.
apples
A new pesticide is developed which controls tent caterpillars.
grapes
The National Marines Fisheries Service bans pesticide spraying within 1,000 feet of waterways containing coho salmon.
wine
The average wage of grape harvesters rises by 10%.
U.S. cars
The U.S. imposes a tariff on Japanese car imports.
hospital beds
Scientists discover a pill that cures cancer.
cement
A 7.9 earthquake hits San Francisco.
Video rentals
The price of getting cable TV goes up.
windshields
A new law is passed requiring gravel trucks to cover their loads with tarps.
Taxi service
Local subway workers go on strike
Bike helmets
The price of bicycles goes down
Lucerne milk
The price of Safeway milk goes down.
jellybeans
The price of jellybeans goes up.
Oreo cookies
The price of milk increases.
Burger King whoppers
McDonald's lowers the price of Big Macs.
Hot dogs
60 Minutes does an expose called "The Truth about Hot Dogs."
Mad Cow Disease wipes out a lot of dairy cows.
candles
An electric company official announces that a computer bug will likely result in power outages.

9. Do Later: Homework
Find a current events article that talks about supply and demand. Come to class with a ½ page summary on the article and be prepared to discuss in class.