DD11 DD22

PP

QDQD11 QDQD22

An increase in tasteincrease in tastefor DVDs results in an

increase in demandincrease in demand.

A decrease in tastedecrease in tastefor videos results in a

decreasedecrease in in demanddemand.

DD33

QDQD33

..

““Decrease in demand”Decrease in demand”after the salmonella scareafter the salmonella scare..

D1

D2

P

11 have died and11 have died and529 have gotten sick.529 have gotten sick.[430 peanut products recalled][430 peanut products recalled]

Wall Street has gottenWall Street has gottenso bad that stockholdersso bad that stockholders

try to kill themselvestry to kill themselvesby eating peanuts.by eating peanuts.

Increase in demand for Increase in demand for dark chocolatedark chocolate after studies after studiesrevealed revealed that there werethat there were health benefitshealth benefits from from eating it.eating it.Scientists have discovered that smokers who ate Scientists have discovered that smokers who ate dark cdark chocolatehocolate had had

less hardening of the arteriesless hardening of the arteries and a and a lowered risk of blood clotslowered risk of blood clots..

DD11 DD22

PP

DD11 DD22

PP

QDQD11 QDQD22

More incomeMore incomeresults inresults in

more demandmore demandfor new cars;for new cars;less demandless demandfor used cars.for used cars.

New CarsNew Cars Used CarsUsed Cars

Less incomeLess incomeresults inresults in

more demandmore demandfor used cars;for used cars;less demandless demandfor new cars.for new cars.

DD11 DD22

PP

QDQD11 QDQD22

More demandMore demandfor both normalfor both normal& & inferior goodsinferior goods

New CarsNew Cars

Used CarsUsed Cars

This is what we told one billion Chineseone billion Chinese, as new potential new potential consumersconsumers, when we opened trade relationstrade relations with them in 19721972.

DD11 DD22

PP

QDQD11 QDQD22

If Steve Jobs responds to iRateiRate customers who

bought the iPhoneiPhone at $599 and says, “iSorryiSorry,we will raise the price back to $599 in 3 weeks.”

iPhoneiPhone

$399$399

Buy it now to save money.Buy it now to save money.

DD11 DD22

PP

QDQD11 QDQD22

If there is expected to be a major shortage of toilet tissuemajor shortage of toilet tissue,then consumers will stock up now or risk not getting any.

DD11 DD22

PP

QDQD11 QDQD22

Let’s say that we are coming out of recessioncoming out of recession & consumersfeel secure about their jobs. [Positive future incomePositive future income]

DD11

DD22

PP

QDQD11QDQD22

Let’s say that we are going into a recessiongoing into a recession and consumersdon’t feel secure about their jobs. [NegativeNegative future income future income]

ComplementComplement[[InverseInverse]]

SubstituteSubstitute[[DirectDirect]]

MilkMilk CerealCereal Pop TartsPop Tarts

DD11 DD22

PPPP11

QDQD11

P2

DD11

DD22

DD

PP

QDQD22

1.1.ResourceResource CostCost [wages & raw materials[wages & raw materials]] [Inverse][Inverse]

WagesWages Raw MaterialsRaw MaterialsIntel Pentium ChipIntel Pentium Chip

SSIf resource cost

decreases supply

Increases[making more $]

If resource cost

increases supply

Decreases[making less $]

SSSS

PP

P1

P1

QS1QS1

BroccoliBroccoli““Substitutes in production”Substitutes in production”I only have I only have

200 acres200 acres

SCornCorn SS11

PP

SS22

QS1QS1

SS11

PPSS22

S CornCornProducers want to produce more of the good where price is increasing,Producers want to produce more of the good where price is increasing,

or at least, where the price is not going down.or at least, where the price is not going down.

BroccoliBroccoli

P2

QS2QS2

P2

QS2QS2

SS

Because cows produce moremilk, farmersdon’t have to have as manycows.[saves $]

SS

PP

We love these cow waterbeds We love these cow waterbeds because webecause we get get better better blood flowblood flow and can and can produce 30% more milkproduce 30% more milk..

Supply curvemoves “udderly”“udderly”to the right.

Less skin abrasionsso happier cowsproduce more milk.

Mooooove Mooooove over and give me thatover and give me that waterbed. waterbed.

Waterbedsforcows.com

NFLNFL

S1PP

Q

$50$50

SupplySupply of of FB games increased when the XFL was FB games increased when the XFL was formed. formed.

SS22

QSQS11 QSQS22

XFL XFL in 2001in 2001

Supply of FB games each week

XFL [Extreme Football League]

8 new teams8 new teams

More gamesMore gameseach yeareach year

If the Bubba Gump Shrimp CBubba Gump Shrimp Companyompany expects shrimp shrimp prices to increaseprices to increase more more in the future, they will supply (more/less) shrimp to the market now. 

If the Bubba Gump Shrimp CBubba Gump Shrimp Companyompany expects shrimp shrimp prices to decrease more prices to decrease more in the future, they will supply (more/less) shrimp to the market now. 

SS11

[“INVERSE”][“INVERSE”]

PP

SS22SS22

SS33[Direct][Direct]

PP

Free money from the government (subsidiessubsidies) induces suppliers to supply more.

SS11 SS22

If subsidies are taken away, then suppliers are losingmoney and will decrease supply.

SS33[Inverse][Inverse]

PP

If business have their taxes decreasedtaxes decreased,it moves the supply curve to the right.

SS11 SS22

If business have their taxes increasedtaxes increased, it moves the supply curve to the left.

I’m losingI’m losingprofits.”profits.”