3
Supply and Demand
Individual Demand
 influenced by prices, income, and tastes
Concerts
(6 @ $40)
$240
Movies
(20 @ $8)
160
Other
Total
1,600
$2,000
A limited income.
The mix of food,
entertainment, etc.
that provides the
greatest benefit.
The Demand Curve
Price
$20
16
12
8
4
2
4
6
8
10
12 Quantity
Demand Schedule
Qnty
$100
1,000
$80
3,000
$60
5,000
$40
7,000
$20
9,000
Price ($)
Price
Demand Curve
120
100
80
60
40
20
1 2 3 4 5 6 7
Concert Tickets (000s)
Price ($)
Movement Along vs. Shift
Change in: price
120
100
Movement along
the demand curve
80
60
Change in: income
tastes
substitutes
40
20
1 2 3 4 5 6 7
Concert tickets (000s)
Shift of the demand curve
=
Change in “demand”
Change in Demand
Demand for a good
Income 
Price of substitute 
Price of complement 
Population 
Expectation that price
will  in the future
Price ($)
Effect of an Increase in Demand
30
25
Supply
20
Increase in
equilibrium price
15
10
Increase in
equilibrium quantity
5
1 2 3 4 5 6 7
Bushels of wheat (millions)
The Supply Curve
Price
$20
16
12
8
4
2
4
6
8
10
12 Quantity
Price ($)
Movement Along vs. Shift
Change in: price
30
25
Movement along
the supply curve
20
15
Change in: input prices
technology
expectations
10
5
1 2 3 4 5 6 7
Bushels of wheat (millions)
Shift of the supply curve
=
Change in “supply”
Changes in Supply
Supply of a good
Input costs 
Technological advance
Number of suppliers 
Expectation that price
will  in the future
Government subsidies 
Supply, Demand, and Equilibrium
Price ($)
 when quantity demanded = quantity supplied
30
25
Demand
Supply
20
At $20: excess supply
 price will drop
15
10
At $10: excess demand
5
 price will rise
1 2 3 4 5 6 7
Bushels of wheat (millions)
Price
$20
16
12
8
4
2
4
6
8
10
12 Quantity
Price ($)
Effect of an Increase in Supply
30
25
Decrease in
equilibrium price
20
15
10
Increase in
equilibrium quantity
5
1 2 3 4 5 6 7
Bushels of wheat (millions)
Applications
Monthly Rent ($100)
Apartment Rental: Increased enrollment
12
10
8
6
4
2
1
2
3
4
5
6
7
No. of apartments (000s)
Price per pound ($)
Coffee: Poor weather in Brazil
1.2
1.0
0.8
0.6
0.4
0.2
5 10 15 20 25 30 35
Pounds of Coffee (M)
Price per pound ($)
Increasing Poultry Consumption
3.0
2.5
2.0
1.5
1.0
0.5
20 40 60 80 100 120 140
Pounds of Poultry (M)
Price per unit ($)
Falling Cocaine Prices
30
25
20
15
10
5
1
2
3
4
5
6
7
Units of cocaine (00s)