SUPPLY/DEMAND

 Demand is the desire to own something

and the ability to pay for it.
 Graphing Demand
 Demand schedule- a chart that shows how much
people will buy at certain prices
 Demand curve- the graph of the chart; always
slopes downward b/c the more it costs, the less
people will buy
 Quantity is on the x-axis; Price is on the y-axis
 Demand= the entire graph
 Quantity demanded= the amount desired at that
price
 Law of Demand: The less it costs, the more
people buy; the more it costs, the less people buy
 A change in quantity demanded is caused by a price
change. This is a movement along the demand curve.
 Shifts in the Demand Curve
A shift in the entire curve is a change in demand.
Demand can shift IN or to the LEFT (from D1 to D3). This means FEWER people are
buying the product.

Demand can shift OUT or to the RIGHT (from D1 to D2). This means
MORE people are buying the product.
 Let’s
Shift!
What causes shifts:
1. substitutes- butter/margarine
2. Complements- things that can
be used w/ the product;
milk/cereal
3. Population changes- lots of
-Increase in demand- shift
teenagers=lots of tennis shoes out or to the right; a good
4. Income changes- I get a raise; thing; people want more of
we go out to dinner more often it
-Decrease in demand-
5. Tastes & preferences- Grape shift in or to the left; a bad
Kool-Aid is the best thing ever! thing; people want less of
it
 Substitution Effect:
Jif Peanut Butter has doubled in price. What
happens to the demand for Peter Pan
Peanut Butter?
  Complementary goods or complements
are two goods that are
bought and used together.

If the price of peanut

butter increases, what
will happen to the
demand for jelly?
 Population Changes:
Women are having fewer children.
What will happen to the demand for
diapers?
 Income Effect:
During the pandemic, many people
were out of work. How did this affect
the demand curve?
 Tastes and Preferences:
Ground effects are back! Ever since
rappers and professional athletes have
outfitted their cars with this feature,
people are going crazy for this fad!
 Inferior Goods= goods whose demand increases when a
person’s income decreases; store brand products are
usually in this category
 Normal Goods= goods whose demand is steady or rises
when a person’s income is steady or rises; name brand
items are usually in this category
https://money.howstuffworks.com/personal-finance/budgeting/
10-store-brand-products-same-as-name-brands.htm
What does NOT cause demand to
shift?
The price of
that product
will
NEVER EVER
EVER EVER
EVER
Cause the
demand
curve for
that product
to shift?
WHY? Changes in price are shown
along the curve. Changes in
price ARE the curve.
 The Law of Supply
 Companies make more when the product
costs more; companies make less when
the product costs less

 Companies want to make the biggest profit

possible. If they know you will still buy the
product at the highest price, they won’t
lower the price.
 Supply
 Supply= the amount of
goods available.
 Qty. supplied= the
precise amount
supplied at that price
 Graphing Supply
 Supply schedule- a chart that shows how much
companies will produce at certain prices
 Supply curve- the graph of the chart; always
slopes downward b/c the more it costs, the more
companies will make
 Quantity is on the x-axis; Price is on the y-axis
 Supply= the entire graph
 Quantity supplied= the amount produced at that
price
 Thecurve always slopes upward b/c the
more it costs, the more that will be produced
 Quantity is always on the x-axis
 Price is always on the y-axis
 Let’s
Shift!
What causes supply shifts:
1. Price of materials
2. Technological advances
3. Changes in the number of
companies that make the
product
-Increase in supply- shift
4. Business taxes out or to the right; a
good thing; businesses
5. Government regulation or making more
deregulation -Decrease in supply-
6. Future expectations shift in or to the left; a
bad thing; businesses
making less
Changes in the $ of materials:
You make t-shirts. What would
happen to your supply curve if
the price of cotton increases:
Technological Advances (or Glitches):
If you installed new software and it
doesn’t function properly, what will
happen to your supply curve?
 Changes in the # of Firms:
There was once 1 Burger King. Now
there are 5.What will happen to the
supply of Whoppers?
 Changes in Business Taxes:
The federal government has decreased
the amount you pay in business taxes.
What will happen to your supply curve?
 Government (de)regulation:
The government has now decided that cribs
should be designed so babies’ heads won’t get
stuck between the openings. What will happen to
the supply curve?
 Future Expectations:
You know the supplier of a key
component of your product will soon
run low on this item. How will this affect
your supply curve?
 What does NOT cause supply to
shift?
The price of
that product
will
NEVER EVER
EVER EVER
EVER
Cause the
supply curve
for that
product to
shift?
WHY? Changes in price are shown
along the curve. Changes in
price ARE the curve.
 When the supply When Supply
and demand
graphs appear and Demand
together, where Meet
they cross is called
the equilibrium
point= price at
which the
producers will
make and
consumers will buy
the same quantity.
 Shortage = Excess Demand
 Any area below
the equilibrium
is a shortage.
The price is so
low, producers
won’t make
enough, but
everyone wants
it.
 Surplus = Excess supply
 Any area
above the
equilibrium is
a surplus. The
price is so
high,
producers will
make more
but people
won’t buy it.
  Price ceiling -is a maximum price that can
be legally charged for a good or a service.

The price hits its head

on the ceiling and can’t
go up any further.
Is there an equilibrium
point when there is a
price ceiling? Why not?
 What things have price ceilings?
(Maximum prices?)
 Section 8
housing- help
poor people
 Prescription
medicine
Why are there
always shortages
whenever there is
a price ceiling?
 Price Floor
Price floor is the minimum price for a good or service.

The price
has its feet
on the
floor and
can’t go
any lower.

Is there an
equilibrium
price when
there is a
price floor?
Why not?
 What things have price floors?
(Minimum prices)
 The minimum
wage
 Farm prices
(farmers get
subsidies from the
government)
 Why is there
ALWAYS a
surplus when you
have a price
floor?