Supply and Demand Whos the boss o The
Supply and Demand
Who’s the boss? o The “marketplace” in a market economy is run by 2 distinct groups of people…Consumers and Producers o Consumers: People who buy and use goods services and o Producers: individuals and organizations that provide goods and services for sale
Consumers and Demand o Consumers make decisions about what to purchase using their “dollar votes” o When consumers cast “dollar votes” for something, they create demand o Demand: the amount of a good or service that consumers are willing and able to buy at a given price o In other words… people buying it? ? ? are
The Demand Curve o Demand can be easily measured using a graph • The Demand curve always slopes down from left to right • Price is measured going up the graph • Quantity is measured going across
Price and Quantity Demanded o The demand curve shows the relationship between the price of a product and the quantity demanded… o As price goes up…the quantity demanded goes down…
Demand Price o If a good or service is popular…it will have an increased demand o There’s an increased demand for pumpkins in October… o There’s a decreased demand for shorts in December… o There’s an increased demand for convertibles in the spring… o When demand for an item is high…the price usually increases, and vice versa
Producers and Supply o Producers make decisions about what to supply based on what consumers are buying o If consumers are demanding an item, producers will supply it o Supply: the amount of a good service that producers are and able to produce given price or willing at a
The Supply Curve o Supply can be easily measured using a graph • The Supply curve always slopes upward from left to right • Price is measured going up the graph • Quantity is measured going across
Price and Quantity Supplied o The supply curve shows the relationship between the price of a product and the quantity supplied… o As price goes up…the quantity supplied goes up…
Supply and Price o If a product is highly demanded, it will have an increased price o Because consumers are willing to pay more…producers are willing to supply more o There’s an increased supply of pumpkins in October… o There’s a decreased supply of shorts in December… o There’s an increased supply of convertibles in the spring… o Producers can charge a higher price for items when their demand is high
Other factors influence supply o Sometimes unexpected events outside the marketplace will effect supply o A hurricane, drought, other natural disaster could effect producers ability to supply or o What would happen to the supply of Chevy trucks if the workers who build them go on strike? ? ?
Determining Market Price o Supply and demand work together to determine the market price of an item o Market Price: the point where supply and demand are equal o At market price: o Consumers are willing to pay the price of an item o Producers are willing to sell the item at that price
Market Equilibrium Graph o Market Equilibrium price can be easily seen on a graph of supply and demand o Equilibrium price is where the supply and demand curves cross
Supply & Demand Graph o. Video Explanation
In Closing… o Producers offer goods and services for sale… o Consumers are individuals who purchase goods and services o Producers offer supply for sale o Consumers demand items to buy o Market Equilibrium is the place where supply and demand are equal
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