Demand, Supply and Market Equilibrium

  1. Demand

Supply and demand together set ______for goods and services.

Demand - ______on the part of people to buy certain quantities of a good or service.

______is how many goods a single person is willing to buy at any price.

Market demand is how many goods ______

Demand Schedule

A demand schedule is a table that ______is willing to buy over a range of possible prices.

Draw the example Demand Schedule here:

Demand Graph

A demand schedule ______.

  1. ______are always on the vertical axis and ______is always on the horizontal axis.
  2. Each point on the graph shows ______at a particular price.
  3. ______that connects these points.

Draw the sample Demand Graph here:

Law of Demand

The Law of Demand:

Utility: ______we get from using a product.

Principle of Diminishing Marginal Utility states that: ______

  1. Changes in Demand

6 things can cause demand to change:

1. Change in ______

2. Change in ______

3. Change in ______

4. Change in ______

5. Change in ______substitute goods.

- Substitute Good: A good that can be used ______.

6. Change in ______complementary items.

- Complimentary Good: ______

A change in any factor other than ______causes a shift in the curve:

A decrease in demand shifts the demand curve to the ______. DRAW THIS:

An increase in demand shifts the demand curve to the ______. DRAW THIS:

  1. Elasticity of Demand

Elasticity of demand: A measure of the ______.

If a change in the price of an item has a very big effect on the quantity demanded, ______

- ______are demand elastic. People will buy a lot of candy if it is 10 cents per candy bar, but they will buy almost no candy if it is $2 per bar.

- Other examples: ______

If a change in the price of an item has little effect on the quantity demanded, ______

- ______Examples: salt, sugar, turkey in late November or Frasier Firs in late December;

- Oil has traditionally been inelastic ______

Supply

Law of Supply–

This law is based on the idea that businesses provide goods and services in order to make a ______.

  1. Supply Schedule - chart showing ______various possible prices.
  2. Supply Curve - Graphical representation of a supply schedule. This shows that at higher prices, suppliers are willing to produce more product. Direction of the supply curve is always ______.
  3. Supply of Labor: How many hours do you want to work if you are being paid $6 per hour? What if you were being paid $20 per hour?
  4. Draw the direction the supply curve always slopes. Make sure to label your horizontal and vertical axis.

Changes in Supply

Supply can change just like demand does. Be careful! When business costs (expenses, not price) goes up, quantity supplied goes down. Think about why this is...because businesses want to make as much ______as possible. If they can reduce costs, they supply more.

A decrease in supply shifts the supply curve to the ______. DRAW THIS:

An increase in supply shifts the supply curve to the ______. DRAW THIS:

  1. Changes in ______
  2. Changes in ______
  3. Changes in ______
  4. Changes in ______
  5. Changes in ______
  6. Changes in ______

Market Equilibrium

Draw a supply and demand chart showing how market equilibrium price is found. Write your own definition of what market equilibrium is.

Government Price Controls

______if they think the market will result in unfair prices.

- Price Ceiling: ______Ex: rent control

- Price Floor: ______Ex: minimum wage