The Supply and

Demand Graph
12.2.5 Understand the process by which competition among
buyers and sellers determines a market price
 Graphs
• Supply and Demand are usually shown
in Supply and Demand Graphs
• These graphs show us the relationship
between supply and demand
• Supply is how much the market
(business owners, factories) can offer
• Demand is how much a product is
wanted by the buyers
• Graphs are always joined with a price
and quantity
Building Blocks of a graph
• The vertical line is the price
• The horizontal line is the quantity
• The line going down (\) is the demand
curve
• When prices are high, people do not demand
a lot so there is less quantity
• The line going up (/) is the supply curve
• The higher the price the more business
owners want to sell so higher quantity
 Quick Answer

• What part of the graph shows how

much product is sold by the business?
• Why do we need a line for quantity?
 Demand
• Demand is the line going diagonally • P
down
• Demand is how much people want an
item at a certain price
• The higher the price (P), the less
people want it (Q) because it is
expensive
• The lower the price (P), the more
people want it (Q) because it is
cheaper Q
 Supply
• Supply is the line going up across • P
• Supply is how much businesses are
willing to give based on the price
• The higher the price (P), the more
items (Q) a business will supply
• The lower the price (P), the less
items (Q) a business will supply Q
 Equilibrium
• When suppliers find how much
P
people demand, and stays there
economics reaches an equilibrium
• this means the economy is doing well
because resources are being used
correctly and people are buying
• On graphs, this is shown by both
lines lining up perfectly in the
middle
Q
Break
 Shifts
12.2.5 Understand the process by which competition among
buyers and sellers determines a market price
 Warm Up
• If the price of a good is going up, does supply go up or down?
• How do we know a supply and demand graph is at equilibrium?
 The Relationship
• On Supply and Demand (S+D)
Graphs, the two lines that cross must
always touch each other
• Supply and demand are linked- one
cannot exist without the other
• For demand to be high, supply must
be low
• For supply to be high, demand must
be low
 Shifts
• The supply and demand lines can
move on graph
• The moves are called shifts
• These changes are usually caused by
something related to how much people
want to buy or how much businesses
want to sell
• Shifts can happen to demand and
supply at the same time
 Shifters of Supply
• Shifters of Supply are usually related to how the
supplier can sell the item
• 1) Cost of Production- how much something costs to
make
• 2) Expectations of Seller- if the seller thinks they will
sell a lot of stuff
• 3) Technology and Innovation- if new technology
helps produce more items
• 4) Number of sellers- more people selling, more
items sold
• 5) Natural Disasters or destruction- earthquakes, fires,
hurricanes may stop items from being made
• 6) Government rules- government might ban an item
 Quick Practice- Moving the sticks
• On your paper, move the popsicle stick to the direction that supply should shift. Show it to the partner by your side
• If supply would go up, move to the right
• If supply would go down, move to the left

1) The Mexican President stops companies in Mexico from selling gasoline.

Trucks with avocados run out of gas before passing the border. What
happens to the supply of avocados? Why?
2) The minimum wage rose in California. Factory owners cannot produce as
much product because they cannot sell at the same price. What happens to
the supply of the product? Why?
 Shifters of Demand
• Shifters of Demand are things that change how much
buyers want to buy something
• 1) Tastes or preferences- when buyers want to buy
something because it is cool or stop buying something
because it is no longer fashionable
• 2) Number of Consumers- less people, less buyers
• 3) Consumer Income- people buy what they can afford
• 4) Price of Substitutes- if a similar item (Product B)
costs less, the demand for product A goes down
• 5) Price of Complements- when you buy an item that is
related to another item
• 6) Expectations- if people think something new will be
introduced, people will not buy the old
 Quick Practice- Moving the Sticks
• Using the popsicle sticks, show how demand shifts. When you are done, show the partner behind/in front of you
• If demand is higher, move the stick to the right
• If demand is lower, move the stick to the left

• 1) Apple is planning to release a new iPhone. Because of this, buyers are waiting to
buy a new phone until the new iPhone is released. Will demand go up or down?
Why?
• 2) Supreme clothes are known for “hype” marketing. People love to buy their clothes
because they are cool. However, they lost popularity. What happens to the demand
for the clothes? Why?
Hands On