Lynch Economics Unit 2
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Demand
Demand Schedule
Demand Curve
Law of Demand
Inverse Relationship
Diminishing Marginal Utility
Example of Diminishing Marginal Utility
Shifting Demand Curves
Shaking Demand Curves
Shift or Shake Rhyme
More Demand
Less Demand
Demand Determinants
Consumer Income Problem
Consumer Taste Problem
Substitutes
Subsitutes Problem
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fundamental willingness and ability to buy a product. You have to
have both for it to be a demand.
T-Table representation that shows how many people buy some-
thing at various prices
Graph Representation that shows how many people buy some-
thing at various prices
This curve goes from the Upper Left to Lower Right on a Graph
as prices increase people become less willing & able to buy a
product so quantity demanded decreases. And the opposite is
true. As prices decrease people become more willing & able to
buy.
In Demand, Price & Quantity have an Inverse Relationship
means that people get less satisfaction/utility out of products the
more and more we have. So we are less willing to buy it, unless
the price is lower and lower.
If you had a WHOLE PIZZA and were hungry. The first piece
would be very valuable (super high utility), the next piece would
be valuable (high utility) But by the 5th piece you might be "Bleh"
(low utility) and full. By the 8th piece you might even be "Sick"
(negative utility)
Sometimes the whole Demand Curves moves.
Right is MORE
Left is LESS
Sometimes the Demand Curve (Line) does NOT move. You just
move from point A to point B.
Price Inc = QD Dec & Price Dec = QD Inc
If a problem mentions PRICE
And same product TWICE
It SHAKES like scared little MICE
Shifts the whole Demand Curve RIGHT
Shifts the whole Demand Curve LEFT
5 Factors that Shift Demand Curves:
1) Consume Income
2) Consumer Tastes / Preferences
3) Substitutes
4) Compliments
5) Expectations
If your income goes up, demand for normal goods (good stuff)
shifts right
**this becomes opposite for inferior goods or for lowering income**
If something becomes more popular, demand for that product
shifts right
If something becomes less popular, demand for that product shifts
left
Similiar Products that replace each other
Example: Burger King & McDonalds
Example: Coke & Pepsi
If demand for McDonalds increases (maybe they lower prices or
do thier Monopoly Game) then it effects Burger Kings business by
shifting the Demand Curve Left
**Can reverse all of this**
Lynch Economics Unit 2
Study online at https://quizlet.com/_5hu6a
Products that go together & thier business
effect each other
Compliments
Ex: Peanut Butter and Jelly
Ex: Milk and Cereal
If there is a peanut shortage (or price of peanuts goes up) that
means people will buy less peanut butter. That will cause the
Compliments Problem Demand Curve for JELLY to shift left (as less people eat PB&J)

**Can reverse all of this**

This can be a Demand or Supply Problem
or even BOTH.

Basic common sense, if people expect a change to happen in

future they change thier buying habits (demand) or production
habits (Supply)
Expectations Problem
Ex: Winter is about to start
Demand for Snow Shovels shift RIGHT (as people buy them to get
ready)
Supply for Snow Shovels shift RIGHT (as factories start making
more)
fundamental willingness and ability to produce AND sell a product.
Supply
You have to have both for it to be a Supply.
T-Table representation that shows how many people sell some-
Supply Schedule
thing at various prices
Graph Representation that shows how many people buy some-
thing at various prices
Supply Graph
This curve goes from the Upper Right to Lower Left on a Graph
that as prices increase people become more willing to sell & more
able to produce a product so quantity supplied increases. And the
Law of Supply
opposite is true. As prices decrease people become less willing
to sell & less able to produce.
Price & Quantity move directly same way in Supply problems
Direct Relationship Price Inc = QS Inc
Price Dec = QS Dec
Sometimes the whole Supply Curves moves.
Shifting Supply Curves Right is MORE
Left is LESS
Sometimes the Supply Curve (Line) does NOT move. You just
Shaking Supply Curves move from point A to point B.
Price Inc = QS Inc & Price Dec = Qs Dec
These are factors that can cause the whole supply line to shift
1) Cost of Resources
2) Productivity
3) Producing Technology
Supply Determinants
4) Govt Taxes or Subsidy
5) Expectations
6) Gov't Regulations
7) Number of Sellers
More Supply Shift the Supply Curve RIGHT
Less Supply Shift the Supply Curve LEFT
If the cost of resource (say wages you pay someone, or steel used
in cars) increases you can afford to make less so the Supply Curve
Cost of Resource Problem
Shifts LEFT
**can reverse**
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Lynch Economics Unit 2
Study online at https://quizlet.com/_5hu6a
Productivity Problem
Producing Technology Problem
Government Taxes Problem
Subsidy Problem
Government Regulation Problem
Number of Sellers
Equilibrium Point
Equilibrium Price
QS
QD
Surplus
Shortage
Price Floor
Price Ceiling
Two things that cause Price Increases
Two things that cause Price Decreases
Two reasons Supply & Demand Effect YOU
Example of when Gas Prices Increase
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If something makes your business more productive (say an as-
sembly line or more motivated employees) the supply curve shifts
RIGHT
**can reverse**
If some new technology your business more productive (say com-
puters) the supply curve shifts RIGHT
**can reverse**
Taxes are paid by a company. So if taxes go up, then a company
can afford to make less products and Supply Curve Shifts LEFT
**Can reverse**
A subsidy is giving tax money to a business. This helps them make
more products so Supply Curve Shifts RIGHT
**Can reverse if you remove/lower subsidy**
A quota is a legal limit on the number of products. So if you
LOWER a quota or put a new quota on, you are limiting supply.
This shifts Supply Curve LEFT
**Can reverse by removing a quota**
If more business enter that market that increases supply so the
Supply Curve shfits RIGHT
**can reverse when companies close**
If you graph Supply Curve and Demand Curve on the same graph,
this point is where they cross. It occurs naturally
This is the Price at the Equilibirum Point
It is a natural compromise between
Sellers trying to sell HIGH
Buyers trying to buy CHEAP
Quantity Supplied
Quantity Demanded
When QS > QD
This happens at prices above equilibrium
and causes prices to go back down toward equilibrium
When QD > QS
This is runnign out, making things rare. It happens at prices below
equilibrium and causes prices to go back up
when you set a minimum price by LAW rather than by Supply/De-
mand.
Ex: Minimum Wage
when you set a maximum price by LAW rather than by Supply/De-
mand
When Demand Shifts Right (Increase)
or
when Supply Shifts LEFT (Decrease)
When Demand Shifts LEFT (Decrease)or
or
when Supply Shifts Right (Increase)
They effect
1) Your Job (price you get paid/how easy to get)
2) How much you spend on stuff
When there is more Demand for Gas (Holidays) or Less Supply
(Oil Shortage/Hurrican Katrina)
Lynch Economics Unit 2
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Example of when pay is low
When there is a lot of supply of people able to do that job (Mc-
Donalds Workers) and not a lot of demand for those workers (high
unemployment where people want crappy jobs over no jobs)

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