1. Determinants of Supply and Demand 3-1© 2012 McGraw-Hill Ryerson Limited LO1 Determinants of DemandDeterminants of Supply Consumer preferencesPrices of productive resources Consumer incomesBusiness taxes Prices of related productsTechnology Expectations of future prices, incomes, or availability Prices of substitutes in production Population: its size, income distribution, and age Future expectations of suppliers DistributionNumber of suppliers

2. Simultaneous Changes in Supply and Demand Increase in both demand and supply leads to an increase in equilibrium quantity; price may rise or fall 3-2© 2012 McGraw-Hill Ryerson Limited LO1

3. Self-Test Explain what effect the changes will have on equilibrium price and quantity in the following markets: 3-3© 2012 McGraw-Hill Ryerson Limited LO1 MarketChange a)Day-care services More mothers with small children are returning to the labour force; at the same time, government decides to introduce subsidies for day-care operators. b) MarijuanaGovernment severely increases the penalties for both buying and selling marijuana. c) Compact discs A new processing method significantly reduces the costs of producing CDs; at the same time, more consumers download music directly onto their computers. d)Organic vegetables Vegetarianism increases as a result of medical reports extolling its health benefits; at the same time, tighter regulations on the definition of organically grown products are introduced.

4. MarketChange a)Day-care services b) Marijuana c) Compact discs d)Organic vegetables Self-Test Explain what effect the changes will have on equilibrium price and quantity in the following markets: 3-4© 2012 McGraw-Hill Ryerson Limited LO1