supply and demand. law of demand prices change and people buy more or less of a product. must be...
TRANSCRIPT
LAW OF DEMANDPRICES CHANGE AND PEOPLE BUY MORE OR LESS OF A PRODUCT.
MUST BE WILLING AND ABLE TO BUY
Demand Curve
3.00
2.50
2.00
1.50
1.00
.50
0
0 50 100 150 200 250 300 350
Slices of pizza per day
Pri
ce p
er s
lic
e (i
n d
oll
ars)
DEMAND PRACTICEA LOCAL VIDEO STORE BEGINS TODROP ITS PRICES. WHEN DVD’S
RENT FOR $4.00 APIECE, THE STORE RENTS 200 IN A WEEKEND. FOR EVERY $0.50 THE PRICE DROPS, THE STORE RENTS 25 MORE DVD’S. DRAW A SCHEDULE AND CURVE ILLUSTRATING THIS.
DETERMINANTS OF ELASTICITYSUBSTITUTESPERCENTAGE OF BUDGETTIME TO ADJUST TO PRICE CHANGE
NECESSITY V. LUXURY
ELASTICITY OF DEMANDYES = ELASTICNO= INELASTIC CORN GAS INSULIN
DELAY PURCHASE?SUBS?
BIG % OF INCOME?
DECIDING OUTPUTPROFIT= REVENUE – COSTMARGINAL REVENUE = MARGINAL COST
SHUT DOWN DECISIONREVENUE<VARIABLE COST
Market Supply Curve
Pri
ce
(in
do
lla
rs)
Output (slices per day)
3.00
2.50
2.00
1.50
1.00
.50
0
0 500 1000 1500 2000 2500 3000 3500
Supply
A local shoe factory produces 100 pairs of shoes each week, which sell for $20 a pair. Demand is high, and as the price rises, the factory produces 25 more pairs for every $5 increase. Draw a supply schedule and curve illustrating this.
SUPPLY CURVE PRACTICE
CHANGE IN EQUILIBRIUMP
ric
e
QUANTITY
EQUILIBRIUM POINT
1 2 3 4 5
supply
Demand
E
$10
$8
$6
$4
New demand
c
b
E2