Demand, Supply, and Equilibrium
Bringing it to the quiz
Demand: Movement vs. Shifts
Which is related to price and which to “other things”
(like taste, income, advertising, related products,
expectations, etc.)
Demand: Related goods
•
•
•
•
Complementary
Substitute
Normal
Inferior
Supply: Law of
Movement along the curve is price increase and
suppliers willingness to produced more as a
result
Supply: Shifts
Input Prices
…shifts the S curve
Technology
…shifts the S curve
# of Sellers
…shifts the S curve
Expectations
…shifts the S curve
Equilibrium Changes
• What would happen to the equilibrium price
and quantity of peanut butter if the price of
peanuts went up, the price of jelly fell, fewer
firms decided to produce peanut butter, and
health officials announced that eating peanut
butter was good for you?
Graph it!!
Peanut Butter
Price
S
Pe
D
Qe
Quantity
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went
up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced
that eating peanut butter was good for you?
What’s shifting?
Supply curve or demand curve?
Price
S
Pe
D
1. Flip flops in December
2. Pumpkins after a flood
Qe
Surplus/Shortages