Demand

Individual
Demand
Determinants
of Demand
Supply

Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms

Demand, Supply,
and Market
Equilibrium

End Show
3-1

Copyright 2008 The McGraw-Hill Companies

Chapter Objectives
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms

Demand Defined and What Affects

It
Supply Defined and What Affects It
How Supply & Demand Together
Determine Market Equilibrium
How Changes in Supply and
Demand Affect Equilibrium Prices
and Quantities
Government-Set Prices and their
Implications for Surpluses &
Shortages

End Show
3-2

Copyright 2008 The McGraw-Hill Companies

Demand
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-3

Demand Defined
Demand Schedule
Law of Demand

3.1

3.2

Diminishing Marginal Utility

Income Effect
3.3
Substitution Effect

Demand Curve
Market Demand
Copyright 2008 The McGraw-Hill Companies

3.4

Individual Demand
Demand
Individual
Demand

P6

Supply
Individual
Supply

Individual
Demand
P
$5

Qd
10

20

Market
Equilibrium

35

GovernmentSet Prices

55

Determinants
of Supply

Last Word

Key Terms

80

Price (per bushel)

Determinants
of Demand

4
3
2
1
0

D
10

20

30

40

50

60

70

80

Quantity Demanded (bushels per week)

End Show
3-4

Copyright 2008 The McGraw-Hill Companies

Individual Demand
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms

Determinants of Demand
Tastes
Number of Buyers
Income
Normal Goods
Inferior Goods

Price of Related Goods

Substitute Good
Complementary Good
Unrelated Goods

Consumer Expectations

End Show
3-5

Copyright 2008 The McGraw-Hill Companies

Individual Demand
Demand Can Increase or Decrease

Demand
Individual
Demand

P6

Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word

Individual
Demand
P
$5

Qd
10

20

35

55

Key Terms

80

Price (per bushel)

Determinants
of Demand

Increase in Demand

4
3
2
1
0

D2

Decrease in Demand
2

10

D1

D3
12

14

16

18 Q

Quantity Demanded (bushels per week)

End Show
3-6

Copyright 2008 The McGraw-Hill Companies

Individual Demand
Demand Can Increase or Decrease

Demand
Individual
Demand

An Increase in Demand
Means a Movement
of the Line

P6

Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word

Individual
Demand
P
$5

Qd
10

20

35

55

Key Terms

80

Price (per bushel)

Determinants
of Demand

A Movement Between
Any Two Points on a
Demand Curve is
Called a Change in
Quantity
Demanded

4
3
2
1
0

D2

Decrease in Demand
2

10

D1

D3
12

14

16

18 Q

Quantity Demanded (bushels per week)

End Show
3-7

Copyright 2008 The McGraw-Hill Companies

Supply
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-8

Supply Defined
Supply Schedule
Law of Supply
Revenue Implications
Marginal Cost

Supply Curve
Market Supply
Copyright 2008 The McGraw-Hill Companies

Individual Supply
Demand
Individual
Demand

P6

Supply
Individual
Supply

Individual
Supply
P
$5

Qs
60

50

Market
Equilibrium

35

GovernmentSet Prices

20

Determinants
of Supply

Last Word
Key Terms

S1

Price (per bushel)

Determinants
of Demand

4
3
2
1
0

10

20

30

40

50

60

70

Quantity Supplied (bushels per week)

End Show
3-9

Copyright 2008 The McGraw-Hill Companies

Individual Supply
Determinants of Supply

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-10

Resource Prices
Technology
Taxes and Subsidies
Prices of Other Goods
Producer Expectations
Number of Sellers
Copyright 2008 The McGraw-Hill Companies

Individual Supply
Supply Can Increase or Decrease

Demand
Individual
Demand

P6

Supply
Individual
Supply

Individual
Supply
P
$5

Qs
60

50

Market
Equilibrium

35

GovernmentSet Prices

20

Determinants
of Supply

Last Word
Key Terms

S3
5

Price (per bushel)

Determinants
of Demand

S1
S2

4
3
2
1
0

10

12

14

Quantity Supplied (bushels per week)

End Show
3-11

Copyright 2008 The McGraw-Hill Companies

Individual Supply
Supply Can Increase or Decrease

Demand
Individual
Demand

P6 A Movement Between

Supply
Individual
Supply

Individual
Supply
P
$5

Qs
60

50

Market
Equilibrium

35

GovernmentSet Prices

20

Determinants
of Supply

Last Word
Key Terms

Price (per bushel)

Determinants
of Demand

Any Two Points on a

Supply Curve is Called
a Change in Quantity
Supplied

S3

S1
S2

4
3
2

An Increase in Supply
Means a Movement
of the Line

1
0

10

12

14

Quantity Supplied (bushels per week)

End Show
3-12

Copyright 2008 The McGraw-Hill Companies

Market Equilibrium
Equilibrium Price

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-13

3.1

Equilibrium Quantity
Surplus
Shortage
Rationing Function of
Prices
Copyright 2008 The McGraw-Hill Companies

Market Equilibrium
200 Buyers & 200 Sellers

Demand

Determinants
of Demand
Supply

Market
Demand
200 Buyers

Qd

$5

2,000

4,000

Determinants
of Supply

7,000

Market
Equilibrium

11,000

Individual
Supply

GovernmentSet Prices
Last Word

16,000

6,000 Bushel
Surplus

S
$4 Price Floor

4
3
3

$2 Price Ceiling

7,000 Bushel
Shortage

1
0

Key Terms

Market
Supply
200 Sellers

Price (per bushel)

Individual
Demand

6 7 8

10

D
12

14

16

Bushels of Corn (thousands per week)

End Show
3-14

Copyright 2008 The McGraw-Hill Companies

18

Qs

$5

12,000

10,000

7,000

4,000

1,000

Market Equilibrium
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-15

Changes in Demand
Changes in Supply
Changes in
Equilibrium
Efficient Allocation
Productive Efficiency
Allocative Efficiency
Copyright 2008 The McGraw-Hill Companies

Market Equilibrium
Price Quantity

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-16

Supply Increase;
?
Demand Decrease
Supply Decrease;
?
Demand Increase
Supply Increase;
Demand Increase ?
Supply Decrease;
Demand Decrease ?
Copyright 2008 The McGraw-Hill Companies

Government-Set Prices
Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms

Price Ceilings on Gasoline

Rationing Problem
Black Markets
Rent Controls
Price Floors on Wheat
Optimal Allocation of
Resources
3.2

End Show
3-17

Copyright 2008 The McGraw-Hill Companies

A Legal Market for Human

Organs
t
s
a
L
rd
o
W

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-18

Waiting List for Transplants

Demand for Organs
Vertical Supply of Organs
Incentive Role of Market and UpSloping Supply
Increases Quantity
Decreases Price
Moral Objections
Increase the Cost of Health Care
Better to Legalize and Regulate?

Copyright 2008 The McGraw-Hill Companies

A Legal Market for Human

Organs
t
s
a
L
rd
o
W

Demand
Individual
Demand

S1

Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices

Supply With Price Incentive

S2
Supply of Organs
Demand for Organs
Shortage at Zero Price
Q1 Q 3

P1
At Price P1 the
Shortage is Reduced
By Q1 Q2

Last Word
Key Terms

P0

End Show
3-19

Copyright 2008 The McGraw-Hill Companies

D1
Q1

Q2

Q3

Key Terms Page

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices
Last Word
Key Terms
End Show
3-20

demand

demand schedule

law of demand
diminishing marginal utili
ty

income effect

substitution effect

demand curve
determinants of demand

normal goods

inferior goods

substitute good

complementary good

change in demand
change in quantity dema
nded

Copyright 2008 The McGraw-Hill Companies

supply
supply schedule
law of supply
supply curve
determinants of supply
change in supply
change in quantity supp
lied
equilibrium price
equilibrium quantity
surplus
shortage
price ceiling
price floor

Next Chapter Preview

Demand
Individual
Demand
Determinants
of Demand
Supply
Individual
Supply
Determinants
of Supply
Market
Equilibrium
GovernmentSet Prices

The U.S. Economy:

Public and Private
Sectors

Last Word
Key Terms
End Show
3-21

Copyright 2008 The McGraw-Hill Companies