Macroeconomics CHAPTER 3 Supply and Demand PowerPoint® Slides by Can Erbil © 2004 Worth Publishers, all rights reserved

2 Supply and Demand   Competitive market   The supply and demand model   The demand curve   The supply curve   Factors that cause the demand curve to shift, and factors that cause the supply curve to shift   The equilibrium price   How the equilibrium price changes when the supply and demand curves shift

3 The Law of Demand Higher price for a good, other things equal, leads people to demand a smaller quantity of the good.

4 An Increase in Demand

5 Movement Along the Demand Curve vs. Shift of the Demand Curve

6 Shifts of the Demand Curve

7 What causes a demand curve to shift?   Changes in the Prices of Related Goods   Substitutes   Complements   Changes in Income   Normal Goods   Inferior Goods   Changes in Tastes   Changes in Expectations

8 The Supply Curve

9 A Decrease in Supply

10 Movement Along the Supply Curve vs. Shift of the Supply Curve

11 Shifts of the Supply Curve

12 What causes a supply curve to shift?   Changes in Input Prices   An input is a good that is used to produce another good.   Changes in Technology   Changes in Income   Changes in Expectations

13 Market Equilibrium

14 Price Above Its Equilibrium Level Creates a Surplus

15 Price Below Its Equilibrium Level Creates a Shortage

16 Equilibrium and Shifts of the Demand Curve

17 Equilibrium and Shifts of the Supply Curve

18 Simultaneous Shifts of the Demand and Supply Curves

19 Effects of the “War on Drugs”

20 The End of Chapter 3 coming attraction: Chapter 4: The Market Strikes Back