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2. Chapter Menu Chapter Introduction Section 1:Section 1:Demand Section 2:Section 2:Factors Affecting Demand Section 3:Section 3:Supply and the Supply Curve Section 4:Section 4:Demand and Supply at Work Visual Summary

3. Chapter Intro 1 Two forces work together in markets to establish prices for all the goods and services we buy. They are demand— the desire, willingness, and ability to buy a good or service, and supply—the quantities of a good or service that producers are willing to sell at all possible market prices.

4. Chapter Intro 2 Section 1: Demand Supply and demand in a market interact to determine price and the quantities bought and sold. Demand is the desire, willingness, and ability to buy a good or service.

5. Chapter Intro 2 Section 2: Factors Affecting Demand Supply and demand in a market interact to determine price and the quantities bought and sold. Several factors can cause market demand for a product or service to change.

6. Chapter Intro 2 Section 3: Supply and the Supply Curve Supply and demand in a market interact to determine price and the quantities bought and sold. Supply is the willingness and ability to produce and sell a good or service.

7. Chapter Intro 2 Section 4: Demand and Supply at Work Supply and demand in a market interact to determine price and the quantities bought and sold. In our economy, the forces of supply and demand work together to establish prices.

8. Chapter Preview-End

9. Section 1-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and quantities bought and sold.

10. Section 1-Key Terms Guide to Reading Content Vocabulary demand demand scheduledemand schedule demand curvedemand curve law of demand market demand utility marginal utility Academic Vocabulary identify illustrate likewise

11. A.A B.B Section 1-Polling Question Have you ever bought something just because it was cheap? A.Yes B.No

12. Section 1 An Introduction to Demand Demand is the desire, willingness, and ability to buy a good or service.

13. Section 1 An Introduction to Demand (cont.) Demand is the desire, willingness, and ability to buy a good or service.Demand Demand schedule:Demand schedule –Lists how much of a product someone would be willing to buy at different prices

14. Section 1 An Introduction to Demand (cont.) Demand curve:Demand curve –Graph showing how much of a product would be bought at all possible prices

15. Section 1 The law of demandlaw of demand –Quantity demanded and price move in opposite directions –A common sense approach to demand An Introduction to Demand (cont.)

16. A.A B.B Section 1 Do you agree that people often wish to buy things that they are unable to purchase? A.Agree B.Disagree

17. Section 1 Market Demand Market demand is the total demand of all consumers for a product or service.

18. Section 1 Market Demand (cont.) Market demand is the total demand of all consumers for a product or service.Market demand Determining market demand for an item involves research. The Law of Demand

19. Section 1 Market Demand (cont.) Utility:Utility –The pleasure a product provides –Not all objects have utility for all people

20. Section 1 Diminishing marginal utility—product pleasure decreases with increased consumptionmarginal utility Explains why prices fall as consumers buy more of an item. Market Demand (cont.)

21. A.A B.B Section 1 Do you think you would be willing to pay the same amount for a second copy of an item? A.Yes B.No

22. Section 1-End

23. Section 2-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

24. Section 2-Key Terms Guide to Reading Content Vocabulary substitute complement demand elasticitydemand elasticity Academic Vocabulary immigration phenomenon

25. A.A B.B Section 2-Polling Question Do you think that people should wait a certain period of time before making a large purchase? A.Yes B.No

26. Section 2 Changes in Demand Several different factors can cause market demand for a good or service to change.

27. Section 2 Changes in Demand (cont.) Demand changes over time due to many forces. Changes in demand: –More consumers enter the market –Incomes, tastes, and expectations change –Prices of related goods change –Can be shown with market demand curve

28. Section 2 Changes in population: –More consumers means higher demand –Fewer consumers means lower demand –Can be affected by immigration –May also be affected by birth and death rates or migration to other areas Changes in Demand (cont.)

29. Section 2 Changes in income: –High wages give people more money to spend –Low wages give people less money to spend Changes in Demand (cont.)

30. Section 2 Changes in taste: –Advertising boost –Popularity fades over time Changes in Demand (cont.)

31. Section 2 Changes in expectations: –Knowledge about future products –Worry about future events Changes in Demand (cont.) A Change in Demand

32. Section 2 Product-Related Changes: –Changes in quality –Changes in substitutessubstitutes –As price of product goes up, demand for its substitute will also go up. Changes in Demand (cont.) Change in Demand for Substitutes

33. Section 2 –Changes in complements (products used together)complements –As demand for one product goes up or down, so will demand for its complements. Changes in Demand (cont.) Change in quantity demanded tracks the movement along a given demand curve.

34. A.A B.B C.C D.D Section 2 Which of the following expectations would make you change your current spending habits? A.New fuel technology due in ten years B.Changes in clothing style C.An upcoming presidential election D.The release of a new video game system

35. Section 2 Elasticity of Demand Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

36. Section 2 Elasticity of Demand (cont.) Demand elasticity is the extent to which price changes affect demand.Demand elasticity Causes of Elastic Demand: –Attractive substitutes –Ability to postpone purchase

37. Section 2 Elasticity of Demand (cont.) Causes of Inelastic Demand: –Few or no substitutes (e.g., medicine) Demand for luxuries more elastic than demand for necessities

38. A.A B.B Section 2 Do you agree that gasoline has an inelastic demand? A.Agree B.Disagree

39. Section 2-End

40. Section 3-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

41. Section 3-Key Terms Guide to Reading Content Vocabulary supply law of supply supply schedulesupply schedule supply curve profit market supply productivity technology subsidy supply elasticity

42. Section 3-Key Terms Guide to Reading Academic Vocabulary motive restrict

43. A.A B.B Section 3-Polling Question Do you agree that producers should always provide a greater supply of a product than they think they will really need? A.Agree B.Disagree

44. Section 3 An Introduction to Supply Supply is the quantities of a good or service that producers are willing to sell at all possible market prices.

45. Section 3 An Introduction to Supply (cont.) Supply is the quantity of goods and service for sale.Supply Supply is the opposite of demand.

46. Section 3 The law of supply:law of supply –As prices go up, so do supplies of goods; as prices go down, so do supplies –Law illustrated by a supply schedulesupply schedule An Introduction to Supply (cont.) The Law of Supply

47. A.A B.B Section 3 Do you know why diamonds, a luxury item, costs more than water, which is need for survival? A.Yes B.No

48. Section 3 Graphing the Supply Curve As with the law of demand, special tables and graphs can show the law of supply.

49. Section 3 Graphing the Supply Curve (cont.) Special graphs and tables can show the law of supply. A supply curve graphically shows the amount of a product that would be supplied at all possible prices in the market.supply curve

50. Section 3 Profit motive:Profit –Pushes producers to try to make money above costs –Profits can be invested many ways: Graphing the Supply Curve (cont.) Increase wages Invest in business

51. Section 3 Acquire more space Buy new equipment Hire more workers Keep money Graphing the Supply Curve (cont.)

52. Section 3 Market supply:Market supply –Slope follows individual trends –Upward slope shows that producers prefer to sell more items at higher prices –Most important influence is price Graphing the Supply Curve (cont.)

53. A.A B.B C.C D.D Section 3 If you were a business owner, what would you do with your profits? A.Increase workers wages B.Buy more equipment C.Hire more workers D.Spend it on a personal vacation

54. Section 3 Changes in Supply Supply increases or decreases depending on many different factors.

55. Section 3 Changes in Supply (cont.) Different factors cause increases and decreases in overall supply. The cost of resources: –When the price of resources falls, supply goes up. –When the price of resources goes up, supply falls. Shifts in the Supply Curve

56. Section 3 Productivity:Productivity –When productivity increases, costs go down. –When productivity decreases, costs go up. Changes in Supply (cont.)

57. Section 3 Technology:Technology –Can lower costs of production and increase supply Changes in Supply (cont.)

58. Section 3 Government policies: –Usually restrict supply –Taxes Changes in Supply (cont.) Higher taxes lower supply Lower taxes increase supply

59. Section 3 Subsidies:Subsidies –Lower production costs Changes in Supply (cont.) Expectations: –Producers may adjust supply to meet expected demand

60. Section 3 Number of Suppliers: –More suppliers cause more supply –Fewer suppliers cause less supply Changes in Supply (cont.)

61. A.A B.B C.C D.D Section 3 Which of the following do you think has the greatest impact on supply? A.Cost of resources B.Technology C.Expectations D.Number of suppliers

62. Section 3 Elasticity of Supply Supply elasticity measures how the quantity supplied of a good or service changes in response to changes in price.

63. Section 3 Elasticity of Supply (cont.) Supply elasticity measures how the quantity of a good or service changes in response to price.Supply elasticity Depends on the speed at which producers can adjust supply to meet higher prices. –Inelastic supply cannot easily add more supply when prices are high. –Elastic supply can quickly increase production when prices go up.

64. A.A B.B C.C D.D Section 3 Which of the following supplies would be the hardest to increase quickly? A.Beef B.Gold C.Water D.Corn

65. Section 3-End

66. Section 4-Main Idea Guide to Reading Big Idea Supply and demand in a market interact to determine price and the quantities bought and sold.

67. Section 4-Key Terms Guide to Reading Content Vocabulary surplus shortage equilibrium priceequilibrium price price ceiling price floor minimum wage Academic Vocabulary mechanism purchase focus

68. A.A B.B Section 4-Polling Question Do you think an economy would work if everything cost the same price? A.Yes B.No

69. Section 4 Markets and Prices The forces of supply and demand work together in markets to establish prices.

70. Section 4 Markets and Prices (cont.) Supply and demand work together to establish prices. Surplus indicates price is too high for demand.Surplus Shortage indicates price is too low for demand.Shortage The Price Adjustment Process

71. Section 4 The balance between supply and demand is equilibrium price.equilibrium price –Stays until supply or demand changes Markets and Prices (cont.)

72. Section 4 Government control over prices: –Caused by unfair balance between supply and demand –Price ceiling—maximum price for goods and servicesPrice ceiling –Price floor—minimum price that can be charged for goods and servicesPrice floor –Minimum wage is example of price floorMinimum wage Markets and Prices (cont.)

73. A.A B.B Section 4 Do you think the government should control prices? A.Yes B.No

74. Section 4 Prices as Signals In our economy, prices are signals that help businesses and consumers make decisions.

75. Section 4 Prices as Signals (cont.) Prices help businesses and consumers make decisions. Advantages of prices: –They are neutral. –They are flexible. –They allow freedom of choice. –Opposite in command economy –They are familiar.

76. A.A B.B Section 4 Are there any advantages to the lack of choice offered in command economies? A.Yes B.No

77. Section 4-End

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79. VS-End

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91. DFS Trans 3 As the supply increases, the price decreases.

92. DFS Trans 4

93. Vocab1 demand the desire, willingness, and ability to buy a good or service

94. Vocab2 demand schedule a table showing quantities demanded at different possible prices

95. Vocab3 demand curve downward-sloping line that graphically shows the quantities demanded at each possible price

96. Vocab4 law of demand the concept that people are normally willing to buy less of a product if the price is high and more of it if the price is low

97. Vocab5 market demand the total demand of all consumers for a product or service

98. Vocab6 utility the amount of satisfaction one gets from a good or service

99. Vocab7 marginal utility additional use that is derived from each unit acquired

100. Vocab8 identify to find or show the identity of

101. Vocab9 illustrate to show or make clear by example

102. Vocab10 likewise similarly or in addition

103. Vocab11 substitute a competing product that consumers can use in place of another

104. Vocab12 complement product often used with another product

105. Vocab13 demand elasticity measure of responsiveness relating change in quantity demanded to a change in price

106. Vocab14 immigration the arrival of people from another region

107. Vocab15 phenomenon a rare or important fact or event

108. Vocab16 supply the amount of goods and services that producers are able and willing to sell at various prices during a specified time period

109. Vocab17 law of supply the principle that suppliers will normally offer more for sale at higher prices and less at lower prices

110. Vocab18 supply schedule table showing quantities supplied at different possible prices

111. Vocab19 supply curve upward-sloping line that graphically shows the quantities supplied at each possible price

112. Vocab20 profit the money a business receives for its products or services over and above its costs

113. Vocab21 market supply the total of all the supply schedules of all the businesses that provide the same good or service

114. Vocab22 productivity the degree to which resources are being used efficiently to produce goods and services

115. Vocab23 technology the methods or processes used to make goods and services

116. Vocab24 subsidy a government payment to an individual, business, or group in exchange for certain actions

117. Vocab25 supply elasticity responsiveness of quantity supplied to a change in price

118. Vocab26 motive something that causes a person to act

119. Vocab27 restrict to place limits on or keep within bounds

120. Vocab28 surplus situation in which quantity supplied is greater than quantity demanded; situation in which government spends less than it collects in revenues

121. Vocab29 shortage situation in which quantity demanded is greater than quantity supplied

122. Vocab30 equilibrium price the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy

123. Vocab31 price ceiling maximum price that can be charged for goods and services, set by the government

124. Vocab32 price floor minimum price that can be charged for goods and services, set by the government

125. Vocab33 minimum wage lowest legal wage that can be paid to most U.S. workers

126. Vocab34 mechanism the steps that compose a process or activity

127. Vocab35 purchase to buy or pay for

128. Vocab36 focus a central point of attention or activity

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