Supply and Demand in a Market Economy. What is Supply and Demand? Supply = The amount of a good or service that a producer is willing & able to make available

Supply and Demand in a

Market Economy

http://www.google.com/url?sa=i&rct=j&q=economics&source=images&cd=&cad=rja&docid=xEAeQTT7YMSPPM&tbnid=wgmaX1u8Qp1AdM:&ved=0CAUQjRw&url=http://www.theprospect.net/economics-learning-the-supply-and-demand-curves-of-life-but-actually-4879/&ei=rL5eUvzlO9CdkQfW_ICQBw&bvm=bv.54176721,d.eW0&psig=AFQjCNGPPTFKWeaUp331BWnw4W0flp37Qg&ust=1382027281065097

What is Supply and Demand?

Supply = The amount of a good or service that a producer is willing & able to make

available at a range of prices

Demand = The want, willingness & ability to exchange a good/service

I made a delicious pizza!

WAHOOO!!

WE’LL TAKE IT!!!

*All other factors remaining constant!

http://www.google.com/url?sa=i&rct=j&q=super+mario&source=images&cd=&cad=rja&docid=dHNzdenWghptyM&tbnid=Sowc1INlRXWRSM:&ved=0CAUQjRw&url=http://downloadwallpapershd.com/super-mario-2/&ei=wb9eUpLUIcHbkQecjIBo&bvm=bv.54176721,d.eW0&psig=AFQjCNFrG-pXoj834OzkJss50MzbrSjp3A&ust=1382027581472513

http://www.google.com/url?sa=i&rct=j&q=pizza&source=images&cd=&cad=rja&docid=-uks0LaARKQlHM&tbnid=48gy3DOBRlilzM:&ved=0CAUQjRw&url=http://richthediabetic.com/the-great-diabetes-and-pizza-controversy/&ei=MsBeUsH3DsurkAe9_4DADA&bvm=bv.54176721,d.eW0&psig=AFQjCNFC21a_NUfVkh0Y4QnOTHtVygRVRA&ust=1382027691033585

http://www.google.com/url?sa=i&rct=j&q=donkey%20kong%20characters&source=images&cd=&cad=rja&docid=94ZOiuR_5Ke41M&tbnid=8eZoob7KjraoOM:&ved=0CAUQjRw&url=http://www.gamesplayroom.com/donkey-kong.html&ei=psJeUqWvLIO0kQeL84HQDA&bvm=bv.54176721,d.eW0&psig=AFQjCNHTB8KrftFFUKFaGExw86m5sdnnKQ&ust=1382028266084145

Graphing Supply and Demand

Economic charts are always graphed in this manner:

Supply

DemandPRIC

E

QUANTITY (AMOUNT)D is for down

Sup (S = up)

Balancing the BudgetIn order for buyers and sellers to be satisfied with a purchase, a balance must be made.

Equilibrium Point = The quantity of a supplied good meets the demand! (both the buyer and seller are satisfied)

My goal is to sell my pizza for as much

money as people are willing to pay

$1 is the perfect price for me! Any

more and I’ll go eat something else.

Looks like $1 is the perfect price!

http://www.google.com/url?sa=i&rct=j&q=super+mario&source=images&cd=&cad=rja&docid=6DkUN20R5Gx0cM&tbnid=6affsALhni-r2M:&ved=0CAUQjRw&url=http://www.picgifs.com/clip-art/super-mario/&ei=bNteUqv8AYno8QSnt4CIDg&bvm=bv.54176721,d.eWU&psig=AFQjCNHPg5L2wv5JfxQGNWpFBoAlch4ocQ&ust=1382034665530105

http://www.google.com/url?sa=i&rct=j&q=donkey%20kong&source=images&cd=&cad=rja&docid=vYrpY19AnSqXgM&tbnid=-Tc1yL4ikoDhXM:&ved=0CAUQjRw&url=http://donkeykong.wikia.com/wiki/DK:_Jungle_Climber&ei=V91eUuH5K4X28gSRloFg&bvm=bv.54176721,d.eWU&psig=AFQjCNHCnvgwCQ88XAGOlTUHRFUVRgF-TQ&ust=1382035149672531

Graphing Equilibrium Point

Equilibrium Supply Point

Demand

PRIC

E

QUANTITY (AMOUNT)

What Happens If…

If the price of a good is too LOW, a shortage occurs

If the price of a good is too HIGH, a surplus occurs.

I should never have charged $50 per pizza…now NOBODY will buy my food and I have all

these extra pizzas!

Come and get it! Pizza for a nickel!

We ALL want pizza since the price is so

low!Oh no, I don’t have

enough pizza for ALL these guys!

http://www.google.com/url?sa=i&rct=j&q=super+mario&source=images&cd=&cad=rja&docid=dHNzdenWghptyM&tbnid=Sowc1INlRXWRSM:&ved=0CAUQjRw&url=http://downloadwallpapershd.com/super-mario-2/&ei=wb9eUpLUIcHbkQecjIBo&bvm=bv.54176721,d.eW0&psig=AFQjCNFrG-pXoj834OzkJss50MzbrSjp3A&ust=1382027581472513


http://www.google.com/url?sa=i&rct=j&q=sad%20mario&source=images&cd=&cad=rja&docid=K-HO9w26sw5aoM&tbnid=qcvEigAaAmBuOM:&ved=0CAUQjRw&url=http://nintendoeverything.com/wii-send-off-the-ten-biggest-disappointments-on-wii/&ei=q-FeUsPZKIWc8wSoyICwDg&bvm=bv.54176721,d.eWU&psig=AFQjCNFSETYYsJpYXUIc1aVnA-hsJtsVFQ&ust=1382036212605550














http://www.google.com/url?sa=i&rct=j&q=nintendo+villains&source=images&cd=&cad=rja&docid=o_mrC6FzM4ebBM&tbnid=PFbncUx4Jx2xQM:&ved=0CAUQjRw&url=http://fantendo.wikia.com/wiki/Koopa_Troop&ei=8eNeUuvxDI_y8AST_IDgDA&bvm=bv.54176721,d.eWU&psig=AFQjCNGGffiuCIOaQOJRIEwqBptyEOATQQ&ust=1382036827027550

Graphing a Shortage


DemandPRIC

E

QUANTITY (AMOUNT)

Graphing a Surplus


DemandPRIC

E

QUANTITY (AMOUNT)

Price Relationships to Know:• LAW OF DEMAND = INVERSE RELATIONSHIP– Price increase = quantity demanded decrease– Price decrease = quantity demanded increase

• Ex: you go to the store for ice cream & it’s $1 a bar. You buy 10! You go back the next day, it’s $5 a bar….. WOAH! Now, you only buy 2 (your demand is less)

• LAW OF SUPPLY = DIRECT RELATIONSHIP*put your producer hat on!*

– Price increase = quantity supplied increases– Price decrease = quantity supplied decreases

• Ex: I own a pizza place. Every other pizza place in Newtown just went from selling pizza for $10 to selling it for $20. Before people realize that’s RIDICULOUS – I want to stock up on as many pizzas as possible to sell (it’s not going to last).

What does “law” mean

?

RECOGNIZE THE DIFFERENCE!PR

ICE

QUANTITY (AMOUNT)

PRIC

E

QUANTITY (AMOUNT)

PRIC

E

QUANTITY (AMOUNT)

PRIC

E

QUANTITY (AMOUNT)

A SHIFT in demand

S

S

D

D

S S

D D

A SHIFT in supply

PRIC

E

QUANTITY (AMOUNT)

PRIC

E

QUANTITY (AMOUNT)

A change in QUANTITY demanded

S S

D D

A change in QUANTITY supplied

What Happens If…If there is an INCREASE in demand, the demand curve moves RIGHT. How do we reach a new Equilibrium Point?


D2 D1

PRIC

E

QUANTITY (AMOUNT)

What Happens If…If there is a DECREASE in demand, the demand curve moves LEFT. How do we reach a new Equilibrium Point?


D1

D2

PRIC

E

QUANTITY (AMOUNT)

The same is true for the Supply Curve!

If there is an INCREASE in supply, the supply curve moves

RIGHT.

If there is a DECREASE in supply, the supply curve moves

LEFT

Documents

Supply and Demand in a Market Economy. What is Supply and Demand? Supply = The amount of a good or service that a producer is willing & able to make available