# Supply and Demand Notes

```Ms. Young
Supply and Demand Notes
Supply and Demand Notes
Demand - is the utility for a good or service of an economic agent, relative to his/her income.
The Law of Demand states that there is an inverse relationship between price and quantity
demanded.
Example: When the price goes down for a product (milk), the quantity demanded by the
consumer goes up. When the price goes up for a product (milk), the quantity demanded by the
consumer goes down.
Demand Schedule for Milk
Price
\$5
4
3
2
1
Quantity Demanded
10
20
30
50
80
Demand Curve
* Demand (downward sloping)
D
Changes to Demand
1. Substitution Effect
2. Income Effect
3. Law of Diminishing Marginal Utility
Five Shifters of Demand
1. Taste/Preferences
2. Number of Consumers
3. Price of Related Goods (Substitutes,
Compliments)
4. Income (Normal goods, Inferior
Goods)
5. Expectations
1
Ms. Young
Supply and Demand Notes
Changes in Demand

Price stays the same the Five Shifters of Demand moves the curve
*Price NEVER shifts the curve.
Change in Quantity Demanded

Price Changes
Price
 From Point A to B represents Change in
Quantity Demanded
 From Point A to C represents Change in
Demand
C
\$3
A
.
D2
\$2
B
D
Quantity
10
20
Supply a stock of a resource from which a person or place can be provided with the
necessary amount of that resource.
The Law of Supply states that there is a direct relationship between price and quantity
supplied.
Five Shifters of Supply
1.
2.
3.
4.
5.
Price of Resources
Number of Producers
Technology
Taxes and Subsidies
Expectations
*Price moves along the curves.
2
Ms. Young
Supply and Demand Notes
Supply and Demand
Demand Schedule
Supply Schedule
Price
\$5
4
3
2
1
Quantity
Demanded
10
20
30
50
80
Price
\$5
4
3
2
1
Quantity
Supplied
50
40
30
20
10
PRICE
S
S1
*Supply (upward sloping)
D
QUANTITY
*** When there is an increase the curves shift right, decrease curves shift left. ***
Analyze Hamburgers (Assignment)
1.
2.
3.
4.
5.
New grilling technology cuts production time in half
Price of chicken sandwiches (a substitute), increases
Price of hamburgers decreases
Price of ground beef triples
Human fingers found in multiple burger restaurants
a. Draw 5 graphs showing the shifts in supply or demand.
3
```