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Name:______________________________________Date:_____________________Period:_________

Unit 2 SUPPLY AND DEMAND: HOW MARKETS WORK

A ___________________ is a group of buyers and sellers of a particular good or service.

Buyers determine ___________________.

Sellers determine___________________.

Quantity demanded: the amount of a good that buyers are


_____________________________to purchase.

Law of Demand
The quantity demanded of a good__________ when the price of the good ___________.

Bens Demand Curve

Change in Quantity Demanded

Movement ____________ the demand curve.

Caused by a ______________________________________________ of the product.

Change in Demand
Any change that alters the quantity demanded ______________________________.
A shift in the demand curve, either to the__________ or ___________.

Demand Shifters:

T-

I-

R-

E-

S-

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Name:______________________________________Date:_____________________Period:_________

Tastes & Preferences of Consumers


As peoples tastes ____________ in favor of a good, or an effective advertising campaign has
been waged, demand _________________ (shifts to the right).
As peoples tastes change ________________ a good, or a good loses popularity, demand
decreases (________ to the left).

Income of Consumers
As income_____________, consumer demand for goods and services _______________ (shifts
to the right).
As income_______________, consumer demand for goods and services ______________ (shifts
to the left).

Related Goods: Substitutes


Substitute goods can be ______________________in place of one another.
If two goods are __________________, when the price of Good A increases, demand for Good B
increases (shifts to the __________).
If ________goods are SUBSTITUTES, when the price of Good A _________________, demand for
Good B decreases (shifts to the left).

Related Goods: Complements


Complementary goods are used ________each other.
If two goods are _______________________, when the price of Good A increases, demand for
Good B decreases (shifts to the__________).
If two goods are COMPLEMENTS, when the __________ of Good A decreases, demand for Good
B increases (___________ to the right).

Substitute OR Complementary?
Cars and Tires- Cereal and Milk-
Corn and Beans- Toast and Jam-
DVD Players and DVDs- Sweatshirts and Sweaters-
Natural Gas and Electricity-

Expectations of Future Price Changes


If ________________ expect the price of a good to _________in the future, immediate demand
increases (shifts to the right).
If consumers expect the price of a good to _________________ in the future, immediate
demand decreases (shifts to the __________).

Size of Population/Market
As the ______________ of consumers in a given market increases, ______________increases
(shifts to the right).
As the number of ____________________ in a given market decreases, demand decreases
(shifts to the left).

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Name:______________________________________Date:_____________________Period:_________

Elasticity of Demand

Measurement of consumers _____________________________ to price.

ELASTIC:
Buyers are __________________________ to price changes.

INELASTIC:
Buyers are _______ responsive to ______________changes.

Determinants of Demand Elasticity:


_______________________of substitutes
Price relative to___________________
Necessities ______ Luxuries
Time _______________ to adjust to a____________ change

Elastic or Inelastic?
Sugar- New car-
New furniture- Gasoline-

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Name:______________________________________Date:_____________________Period:_________

Food- Aspirin-
Encyclopedia- Diet Coke-
2% Milk- Gold Jewelry-
Sailboat- Insulin-
Socks-

Quantity supplied is the amount of a _____________________________________ are willing and able


to sell.

Law of Supply
The quantity supplied of a good________ when the price of the good_________.

Jerrys Supply Curve

Change in Quantity Supplied

________________________along the supply curve.

Caused by a _________________________________________________ of the product.

Changes in Supply
Any change that alters the quantity supplied _______________________.
A _____________ in the ______________ curve, either to the left or right.

Supply Shifters:

T-

I-

G-

E-

R-

S-

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Name:______________________________________Date:_____________________Period:_________

Technological Advancements
As technology advances, ____________________becomes more efficient and supply increases
(shifts to the right).
International Events/Disasters
When international ___________ (such as wars & revolutions) or natural disasters occur, supply
decreases (shifts to the __________).

Government Intervention
(Taxes, Fees, Regulations, Subsidies)
When a ______, ________, or regulation is imposed on the production of a good or service,
________________ decreases (shifts to the left).
When a _______________ is granted for producers of a good or service, supply increases (shifts
to the right).

Expectations of Future Price Changes


If producers expect the price of a good to rise in the_____________, immediate supply
decreases (shifts to the left).
If ________________ expect the price of a good to ___________________ in the future,
immediate supply increases (shifts to the right).

Resource Costs
As the _____________________________________ (land, labor, and capital) become more
expensive for the producer to purchase, supply decreases (shifts to the left).
As the factors of production (land, labor, and capital) become ________ expensive for the
producer to purchase, supply increases (shifts to the right).

Number of Sellers in the Market


When additional firms (______________________) enter a market, supply of the product
increases (shifts to the right).
When firms (businesses) _________ a market (go out of business or for some other reason
cease production),_____________ of the product decreases (shifts to the left).

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Name:______________________________________Date:_____________________Period:_________

Elasticity of Supply
Measurement of
producers
______________________
to price.

ELASTIC:
Producers are
___________________ to
price changes.

INELASTIC:
Producers are________ responsive to price changes.

Determinants of Supply Elasticity:


Availability of _____________
___________________ of inputs
Storage ____________________
__________ needed to adjust to a ____________ change

Elastic or Inelastic?
Bananas-
Yogurt-
Antiques-
Medical Care-
Putting it all together: EQUILIBRIUM

Equilibrium

_________=_________

Law of Supply and Demand:

The price of any good adjusts to bring the


___________________________________and the
_____________________________________ for that
good into balance.

If Demand Increases P Q

If Demand Decreases P Q

If Supply Increases P Q

If Supply Decreases P Q

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Name:______________________________________Date:_____________________Period:_________

Four Steps to Analyzing Changes in Equilibrium

Does the event shift the supply (__________) or demand curve (________)?

Will the curve shift right ( ) or left ( )?

Draw & label the new curve on your graph

Locate the new equilibrium (_________________________) $ QD QS

200 24 1
Airline Tickets Activity

300 16 10

400 10 16

500 4 22

600 0 25

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Name:______________________________________Date:_____________________Period:_________

Nations largest spaghetti producer cuts pasta prices

Subzero temperatures destroy much of Floridas citrus crop

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Name:______________________________________Date:_____________________Period:_________

Farmer invents new picking machine Harvests apples in half the time

Colorado ski resorts announce 50% increase in lift ticket prices

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Name:______________________________________Date:_____________________Period:_________

Price Control
PRICE CEILING:
(Creates a Shortage)

A ________________ price set by the government that consumers are required to pay for a
good or service.

Prevents prices from getting too _______, enabling consumers to______ essential goods or
services they wouldnt be able to ____________ at the equilibrium price.

Example: ___________________

PRICE FLOOR:
(Creates a Surplus)

A ________________ price set by the government that consumers are required to pay for a
good or service.

____________ price up, ensuring that producers _______________ a benefit for providing a
good or service

Example: ___________________________

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