![Page 1: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/1.jpg)
Unit 2: Supply, Demand, and Consumer Choice
1
![Page 2: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/2.jpg)
Review
• 1. What is the law of demand?
2
![Page 3: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/3.jpg)
LAW OF SUPPLYAs Price Falls…
…Quantity Supplied Increases As Price Rises…
…Quantity Supplied Decreases
3
![Page 4: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/4.jpg)
Supply
4
![Page 5: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/5.jpg)
Supply DefinedWhat is supply?Supply is the different quantities of a good that sellers are willing and able to sell (produce) at different prices.
What is the Law of Supply?There is a DIRECT relationship between price and quantity supplied. (price and quantity supplied go the same direction)
•As P increases, the Q producers make increases•As P decreases, the Q producers make decreases.
Why? Because, higher prices = higher profit. Firms have an incentive to produce more.
EXAMPLE: Mowing Lawns5
![Page 6: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/6.jpg)
EXAMPLE: Mowing Lawns
6
![Page 7: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/7.jpg)
Example of SupplyYou own a lawn mower and you are
willing to mow lawns. How many lawns will you mow at these prices?
Price per hour
Quantity
SuppliedSupply Schedule
7
$1$5
$20$50
$100$1000
![Page 8: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/8.jpg)
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
Draw this large in your notes
8
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
![Page 9: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/9.jpg)
9
![Page 10: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/10.jpg)
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
10
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
![Page 11: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/11.jpg)
GRAPHING SUPPLY
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
11
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if new
firms start making
cereal?
![Page 12: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/12.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
12
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
![Page 13: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/13.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
13
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
![Page 14: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/14.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
14
PriceQuantity
Supplied
$5 50 70
$4 40 60
$3 30 50
$2 20 40
$1 10 30
Supply
![Page 15: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/15.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
15
SupplyS2
PriceQuantity
Supplied
$5 50 70
$4 40 60
$3 30 50
$2 20 40
$1 10 30
Increase in SupplyPrices didn’t change but
there is MORE cereal produced
![Page 16: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/16.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
16
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if there was
no rain and the
crops died?
![Page 17: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/17.jpg)
17
![Page 18: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/18.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
18
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
![Page 19: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/19.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
19
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
![Page 20: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/20.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
20
PriceQuantity
Supplied
$5 50 30
$4 40 20
$3 30 10
$2 20 1
$1 10 0
Supply
![Page 21: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/21.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
21
SupplyS2
PriceQuantity
Supplied
$5 50 30
$4 40 20
$3 30 10
$2 20 1
$1 10 0
Decrease in SupplyPrices didn’t change but
there is LESS cereal produced
![Page 22: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/22.jpg)
Change in Supply
Qo
$5
4
3
2
1
Price of Cereal
Quantity of Cereal
Supply Schedule
10 20 30 40 50 60 70 80
22
PriceQuantity
Supplied
$5 50
$4 40
$3 30
$2 20
$1 10
Supply
What if cereal companies
find a faster way to make
cereal ?
![Page 23: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/23.jpg)
Changes in Supply Curve
• The changes can be• Movement along Supply Curve• Shifts of Supply Curve
![Page 24: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/24.jpg)
5 Changers (SHIFTERS) of Supply1. Change in the cost of factors of
production (resources)2. Change in the price of related goods3. New Technology 4. Business expectations of the future
5. Other factors, Weather, war, tax, etc.)
Changes in PRICE don’t shift the curve. It only causes movement along the curve.
24
![Page 25: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/25.jpg)
Price of Related GoodsPrice of Related Goods
![Page 26: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/26.jpg)
Complementary Products
26
![Page 27: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/27.jpg)
27
Substitutes and complements
Substitutes can satisfy the same want Complements are in joint demand
or
or
or
![Page 28: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/28.jpg)
Weather
Expectations of future prices changes• If consumers expect prices ↑ Demand ↑ now
• If consumers expect prices ↓ Demand ↓ now.
Other Factors
![Page 29: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/29.jpg)
Supply PracticeFirst, identify the determinant (shifter) then
decide if supply will increase or decrease
29
ShifterIncrease or Decrease
Left or Right
1
2
3
4
5
6
![Page 30: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/30.jpg)
Supply Practice
RICE1. A disease kills 40% of rice in China 2. The price of noodles increase 30%3. Government increases tax for rice producers4. New rice technology cuts production time in half5. Minimum wage of workers increases to $15/hour
1. Which SUPPLY SHIFTER?2. Supply will Increase or decrease?3. Which the curve will curve shift in or out?
30
![Page 31: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/31.jpg)
Vocabulary
• 5 Shifters of supply
• Related goods1. Substitute goods
2. Complementary goods
31
![Page 32: Unit 2: Supply, Demand, and Consumer Choice 1. Review 1. What is the law of demand? 2](https://reader030.vdocuments.site/reader030/viewer/2022032415/56649f0b5503460f94c1ec0a/html5/thumbnails/32.jpg)
Homework activity
• Activity 2.15 pg 55• Activity 2.18 pg 59
32