1. Supply and Demand

2. Economic definitions for DEMAND Demand: the total amount consumers are willing and able to buy at all prices.

3. Demand curve: the graphical representation of what consumers are willing and able to buy.

6. Hunter’s Clothing Store is trying to set a price for a new pair of jeans. How do we determine the “best” price where the customers and Hunter will be happy? Selling Price Number Demanded $10.00510 $20.00420 $30.00320 $40.00240 $50.00150

7. Law of Demand: As price increases/decreases, quantity demanded decreases/increases. PQPQ

8. Factors that cause demand to change or shift Tastes and fads Income Number of buyers Future price expectations Price and availability of:  Substitutes  compliments

9. IRDL “IRDL” will help you! INCREASE = RIGHT DECREASE = LEFT

10. Inelastic Demand: Price still moves up and down but Demand stays the same

12. Economic definition for SUPPLY Supply: the total amount of a good or service producers are able to make at all prices.

13. Supply curve: the graphical representation of a good or service producers are able to make at all prices.

15. Law of Supply: as price increases/decreases, quantity supplied increases/decreases PQPQ

16. Hunter’s Clothing Store is trying to set a price for a new pair of jeans. How do we determine the “best” price where the customers and Hunter will be happy? Selling Price Number Supplied $10.000 $20.0086 $30.00179 $40.00272 $50.00365

17. Equilibrium Point: the point at which the quantity & the price are equal

18. Economic Equilibrium Equilibrium is the market clearing price and involves the most efficient choice  Producers and consumers make the most of their limited resources at the least cost  Therefore, producers and consumers act in their own economic self-interest when moving towards equilibrium At this point the number demanded equals the number supplied

19. $60 $50 $40 Price $30 $20 $10 100200300400500 Units demand supply equilibrium At what price should Hunter’s sell their jeans?

20. Shortage and Surplus Shortage occurs when a good or service is priced below the market clearing price  Supply < Demand Surplus occurs when a good or service is priced above the market clearing price  Supply > Demand

21. Shortage and Surplus Both surplus and shortage are inefficient  Both involve missed profit

22. P2P2 P3P3 Surplus Shortage

23. Factors that cause a change in supply: Price of land, labor or capital Technology Number of other sellers Price of other goods I could produce Tax policy