2. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Individual Markets: Demand & Supply

3. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages LAW OF DEMAND As Price Falls… …Quantity Demanded Rises As Price Rises… …Quantity Demanded Falls An inverse relationship exists between price and quantity demanded

4. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE

5. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE Income Effect As prices fall, people have relatively more income

6. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility DOWNWARD SLOPE Income Effect Substitution Effect As prices rise, people will purchase substitute goods

7. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility As a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

8. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Diminishing Marginal Utility Income Effect Substitution Effect LAW OF DEMAND Demand Curve - Graphically

9. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages GRAPHING DEMAND P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 Price of Corn Quantity of Corn CORN Plot the Points 10 20 30 40 50 60 70 80

10. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 55 P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 Price of Corn Quantity of Corn CORN Plot the Points 10 20 30 40 50 60 70 80 GRAPHING DEMAND

11. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 35 P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 Price of Corn Quantity of Corn CORN Plot the Points 10 20 30 40 50 60 70 80 GRAPHING DEMAND

12. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 Price of Corn Quantity of Corn CORN Plot the Points 10 20 30 40 50 60 70 80 GRAPHING DEMAND

13. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 Price of Corn Quantity of Corn CORN Plot the Points 10 20 30 40 50 60 70 80 GRAPHING DEMAND

14. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 D Price of Corn Quantity of Corn CORN Connect the Points 10 20 30 40 50 60 70 80 GRAPHING DEMAND

15. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 D Price of Corn Quantity of Corn CORN 10 20 30 40 50 60 70 80 What if Demand Increases? GRAPHING DEMAND

16. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 D Price of Corn Quantity of Corn CORN 10 20 30 40 50 60 70 80 D’ Increase in Demand Increase in Quantity Demanded 10 20 35 55 80 30 40 60 80 + GRAPHING DEMAND

17. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 D Price of Corn Quantity of Corn CORN 10 20 30 40 50 60 70 80 What if Demand Decreases? GRAPHING DEMAND

18. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 PQDQD $5 4 3 2 1 10 20 35 55 80 D Price of Corn Quantity of Corn CORN 10 20 30 40 50 60 70 80 -- 10 20 40 60 D’ Decrease in Demand Decrease in Quantity Demanded GRAPHING DEMAND

19. 3 - 18 Demand Changes in Demand Supply Changes in Supply Equilibrium Surpluses & Shortages Welfare Economics DETERMINANTS OF DEMAND Tastes (Preferences) Prices of Related Goods – Substitutes & Complements Income – Normal (Superior) & Inferior Goods Number of Buyers Expectations

20. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages LAW OF SUPPLY As Price Rises… …Quantity Supplied Rises As Price Falls… …Quantity Supplied Falls A direct relationship exists between price and quantity supplied

21. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 5 P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

22. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

23. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 35 P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

24. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

25. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Plot the Points GRAPHING SUPPLY

26. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN Connect the Points GRAPHING SUPPLY

27. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN What if Supply Increases? GRAPHING SUPPLY

28. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 Price of Corn Quantity of Corn $5 4 3 2 1 60 50 35 20 5 PQSQS CORN 80 70 60 45 30 S’ Increase in Supply Increase in Quantity Supplied GRAPHING SUPPLY

29. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN What if Supply Decreases? GRAPHING SUPPLY

30. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages S P Q o $5 4 3 2 1 10 20 30 40 50 60 70 80 $5 4 3 2 1 60 50 35 20 5 PQSQS Price of Corn Quantity of Corn CORN S’ 45 30 20 0 -- Decrease in Supply Decrease in Quantity Supplied GRAPHING SUPPLY

31. 3 - 30 Demand Changes in Demand Supply Changes in Supply Equilibrium Surpluses & Shortages Welfare Economics DETERMINANTS OF SUPPLY Resource Prices Prices of Other Goods Technology Taxes & Subsidies Expectations Number of Sellers

32. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages DETERMINANTS OF SUPPLY Resource Prices Technology Taxes & Subsidies Prices of Other Goods Price Expectations Number of Sellers Combining with Demand

33. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Market Clearing Equilibrium MARKET DEMAND & SUPPLY

34. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Surplus At a $4 price more is being supplied than demanded MARKET DEMAND & SUPPLY

35. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 11 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET At a $2 price more is being demanded than supplied Shortage MARKET DEMAND & SUPPLY

36. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages 11 7 S P Q o $5 4 3 2 1 2 4 6 8 10 12 14 16 PQDQD $5 4 3 2 1 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 D PQSQS Price of Corn Quantity of Corn CORN MARKET CORN MARKET Shortage MARKET DEMAND & SUPPLY Surplus

37. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages MARKET EQUILIBRIUM Equilibrium Price & Quantity Free Markets Move Towards Equilibrium Changes in Demand Changes in Quantity Demanded Changes in Supply Changes in Quantity Supplied

38. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Simple Cases Supply Increases –What happens to Equilibrium Price and Quantity Supply Decreases –What happens to Equilibrium Price and Quantity

39. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Simple Cases Demand Increases –What happens to Equilibrium Price and Quantity Demand Decreases –What happens to Equilibrium Price and Quantity

40. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Complex Cases Supply Increases; Demand Decreases Supply Decreases; Demand Increases Multiple Shifts…

41. Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Complex Cases Supply Increases; Demand Increases Supply Decreases; Demand Decreases Multiple Shifts…