Demand Notes

Demand:    Quantities of a particular good or service consumers are willing and able to buy at different possible prices at a particular time

Warm Up: I’m going to sell an A on the next test.  Each student is to                    submit a sealed bid.  The bids are cumulative. 

                    What behavioral relationship do you see?

Law of Demand/Price effect:         

Consumers buy more of something if it costs less and less of something if it costs more

Two sub-concepts to Demand:

A. Quantity: Consumers are able and willing to buy       @different prices

                    B. Price: When prices increase people buy less

Demand Curve: Is Illustrated as an upward sloping curve with Quantity            on the horizontal axis and Price on the Vertical axis

A change in Demand means at every price different quantities will be supplied

Demand Is a Forecasting Device:

By anticipating consumer behavior if one incentive changes (price)

Change in Demand is not always a change in Quantity demanded

A. A change in quantity demanded is caused by price       indicated by movement along the curve

               Ie. Quantity is a street and only a change in price can    move you up and down the street

                             B. A change in quantity demanded is indicated as a shift of                   the curve itself

                                                 Ie. A change in demand determinants like income, tastes, number of buyers, prices of complementary or substitute goods, or consumer expectations moves you to a different street

What does it matter?

                    Businesses need to know and beware that:

                    Only a decrease in prices can increase quantity demanded

                    The only way to raise prices is to have an increase in demand

Supply Notes

Supply:       The relationship between price and quantity of goods or services firms are willing to produce.

Warm Up:  How many of you would do 20 good push ups for an extra credit point on the Supply and Demand Test?

                    For 2 Extra Credit Points

                    For 3 Extra Credit Points

                    For 4 Extra Credit Points

Law of Supply:          The higher the price, the greater the quantity supplied

Two sub concepts:

A. Quantity :           What producers are willing to provide at given prices

                                                                             B. Price:              When items cost more, producers produce more.  When items cost less, producers produce less

Supply Curve:           Illustrated as an upward sloping curve with Quantity on  the horizontal axis and Price on the Vertical axis

A change in supply means at every price different quantities will be supplied

Supply is a Forecasting Device:

It anticipates what producers will do if a single incentive (Price) is changed

A change in supply is different from quantity supplied

A. A change in quantity supplied is caused by price.  It       is movement along the curve itself

                                       Ie. Quantity is a street and only a change in price                                        can move you up and down the street

                                                B. A change in supply is due to things other than price.        It is movement of the curve itself due to:      

                                       1. Technology

                                       2. Production costs

                                       3. Taxes

                                       4. Subsidies

                                       5. Expectations

                                       Ie. A change in demand determinants like                                                       The ones listed above move you to a different                                            street

Vocabulary

Demand

Buying power

Price elasticity of demand

change in demand

price effect/law of demand

market demand

supply

elastic supply

market supply

decrease in supply

price effect/law of supply

inelastic supply