(1-15-16) Supply and Demand

Demand and Supply

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Demand-Quantities that people are willing and able to buy at various prices

Supply-Quantity that producers or sellers are willing and able to produce at various prices

The law of Demand- Inverse relationship between price and quantity demanded.  ↑P↓ Q

The law of Supply- There is a direct relationship between price and quantity supplied ↑P↑Q ↓ P↓ Q

What causes a "change in quantity demanded"?(ΔQD)/What causes a "change in quantity supplied"?(ΔQS) - Δ in price

What causes a "change in demand"?(ΔD)
1.Δ in buyers taste (advertisement)

2.Δ in the # of buyers (population)

3.Δ in the price of related goods -Complementary goods (ham and eggs) -Substitute goods (7Up and Mountain dew)

4.Δ in income - Normal goods -Inferior goods

5.Δ in expectations (future based)

What causes a "change in supply"? (ΔS)
1.Δ in weather (natural)

2.Δ in # of sellers

3.Δ in the costs of production

4.Δ in technology

5.Δ in expectations (sellers)

6.Δ in taxes or subsidies

Normal Goods-as peoples incomes rise demands for good and services also rises
Inferior Goods- an increase in income causes a fall in demand