Demand & Supply
Demand & Supply
DEMAND & SUPPLY
WHAT ARE DEMAND AND SUPPLY, AND WHAT FACTORS INFLUENCE THEM?
Objectives:
Create demand schedules and use the information to graph demand curves.
Differentiate between events that cause shifts in demand or supply versus those that cause movement along the curve.
Graph shifts in demand or supply and explain why the curves shifted
HOW DO DEMAND AND PRICE INTERACT?
Demand
is what people are willing and able to buy at various prices.Quantity
demanded is a specific amount an individual is willing and able to buy at a given price.A demand schedule is a table that shows the quantity demanded at each price. When the data are graphed, the result is a demand curve.
The law of demand states that as price increases, the quantity demanded for a good or service decreases, and vice versa.
WHAT CAN CAUSE DEMAND TO CHANGE?
Factors other than price can cause the entire demand curve to shift. This is called a change in demand. These factors, called demand shifters, include changes in consumer income, the number of consumers, consumer tastes and preferences, consumer expectations, the price of substitute goods, and the price of complementary goods.
HOW DO SUPPLY AND PRICE INTERACT?
Supply
is what producers are willing and able to supply at a specific price.Quantity
supplied is the quantity producers are willing and able to supply at a specific price.A supply schedule is a table that shows the quantity supplied at different prices. When the data are graphed, the result is a supply curve.
The law of supply states that as price increases, the quantity supplied for a good or service also increases, and vice versa.
WHAT CAN CAUSE SUPPLY TO CHANGE?
Factors other than price can cause an entire supply curve to shift. This is called a change in supply. These factors, called supply shifters, include changes in the cost of inputs, the number of producers, conditions due to natural disasters or international events, technology, producer expectations, and government policy.
WHAT IS DEMAND ELASTICITY? WHAT FACTORS INFLUENCE IT?
Demand elasticity
the degree to which the quantity demanded changes in response to a change in price. Factors that influence demand elasticity are availability of substitutes, price relative to income, necessities versus luxuries, and time needed to adjust to a price change.
WHAT IS SUPPLY ELASTICITY? WHAT FACTORS INFLUENCE IT?
Elasticity of supply
measures the sensitivity of producers to a change in price. If supply is elastic, producers will increase supply significantly, even for a small increase in price. If supply is inelastic, producers cannot easily increase supply even for a big increase in price. Factors that influence supply elasticity are availability and mobility of inputs, storage capacity, and time needed to adjust to a price change.