1. Supply and Demand Intro to Business 1-4

2. Goals Describe supply and demand orally and with graphs Discuss how supply and demand affect products and services

3. Participating in a Market Economy In a market economy buyers and sellers use the marketplace to make decisions Buying decisions are made by consumers – Individuals – Businesses – Governments

4. Consumer: a person who buys and uses goods and services Buying decisions influence the market

5. Producers: individuals or organizations that determine what products and services will be available to sell Take risks to make a profit

6. Economic system works because of supply and demand

7. Consumers Set Demand When consumers make decisions on purchases they set demand Demand: the quantity of goods or services consumers are willing and able to buy

8. Demand Example New Restaurant Example A Slow service Poor food quality High noise Small portions New Restaurant Example B Fast Friendly High quality food

9. Producer Establishes Supply Understanding demand tells a business what type and what quantity of products and services to supply Supply: the quantity of a good or service that businesses are willing and able to provide

10. Supply If customers are seeking a popular product and are willing to pay a high price for it, the business will provide the product to meet the need If there is heavy competition keeping the price low businesses are less likely to want to offer the product for sale

11. A Graphic View Demand Relationship between the price of the product and the # demanded by customers As the price decreases, the # demanded by customers increases Supply Relationship between the price of the product and the # the businesses will supply As the price increases, the number provided will also increase

12. Chapter 1Slide 12 DEMAND AND SUPPLY

13. Determining the Price Why is the price of a hotel room in Phoenix, Arizona, higher in the winter than summer?

14. Factors Influencing Demand If many customers want a particular good or service the price will go up More people vacation in Phoenix in the winter than in the summer so the demand rises When fewer people need rooms in the summer the cost goes down

15. When customers see options to satisfy a need the price will not be as high – Willing to switch if the price increases When only one product will do, no substitutes available demand will be high – Even if the price increases, they will be willing to pay the higher price because they are unwilling to switch to another choice

16. Factors Influencing Supply Competitors offer similar products to the same customers – Lots of competitors make it difficult to increase the price – When there is no competition prices will tend to be higher – Natural disaster may affect supply

17. Determining Market Price Supply, demand, and competition determine market price Market price: the point where supply and demand are equal

18. Chapter 1Slide 18 MARKET PRICE

19. Assessment 1-4 Worksheet – Do a practice a #4 together,