SUPPLY
AND
DEMAND
DEMAND
The quantity of a specific product that a buyer is able and
willing to buy at a certain price
• Usually at a particular time and place
• Remember those time and place utilities that add value to a
product??
Individual demand – the quantity of a product demanded by
an individual consumer
*Market demand – the sum of all the individual demands for a
specific product for a specific time period
SUPPLY
The quantity of a specific product that the supplier is willing
to supply at a certain price.
Individual supply – the quantity of a product supplied by an
individual supplier
*Market supply – the sum of all the individual suppliers’
supply of a specific product for a specific time period
From this point on, we will be talking about market supply
and market demand.
EFFECT OF PRICE ON
SUPPLY AND DEMAND
LAW OF DEMAND
(IN A CONSTANT ENVIRONMENT)
When prices fall, demand will rise.
Consumers will buy more when prices are low.
When prices rise, demand will fall.
Consumers will buy less when prices are high.
What product(s) are you familiar with where you have noticed
price affecting the law of demand?
DEMAND CURVE
For iPhones in December in Morehead, KY
$450.00
$400.00
$350.00
$300.00
$250.00
iPhone
$200.00
$150.00
$100.00
$50.00
$100
200
300
Quantity Demanded
400
LAW OF SUPPLY
(IN A CONSTANT ENVIRONMENT)
When prices are high, supply will rise.
Suppliers are willing to supply more when the price of the
product is high.
When prices fall, supply will fall.
Suppliers are willing to supply less when prices are low.
SUPPLY CURVE
Supply curve for iPhones in Morehead, KY
$450.00
$400.00
$350.00
$300.00
$250.00
iPhone
$200.00
$150.00
$100.00
$50.00
$100
200
300
Quantity Supplied
400
EQUILIBRIUM PRICE
The point at which the demand and supply for a particular
good or service meet
$450.00
$400.00
$350.00
Price $300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-
Equilibrium Price
iPhone Demand
Curve
iPhone Supply
Curve
100
200
300
Quantity
400
SHORTAGE OR SURPLUS
Shortage – there is more demanded than the producers are
willing and able to supply
Surplus – there is more supplied than people are willing or
able to buy.
Scarcity – What is it?? Where does it fit – shortage or surplus?
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TELEVISION ACTIVITY
Complete handout – supply/demand/shortage/surplus