More income results in more
demand for new cars; less
demand for used cars
Less income results in
more demand
for used cars;
less demand for new
cars.
More demand
for both new
and used cars
New Cars
Used Cars
• Future availability of milk
• If there is a suspected shortage of milk
consumers will stock up now to avoid risk
of not getting any.
• If there is a price change where there is an introductory
price (300 dollars for an iPhone 5) consumers will buy
now to avoid risk of paying more later.
• If there is a price change where there will be a sale (back
down to 300 dollars from 800 dollars for 1 week only!),
consumers will buy now to avoid risk of paying more
later.
• Future income
• If we are coming out of a recession and
consumers feel secure about their jobs =
positive future income.
• Future income
• If we are going into a recession and
consumers don’t feel secure about their
jobs = negative future income
Substitutes-Direct; Complements-Inverse
• Complement (Inverse) – Milk
• Substitute (Direct) – Pop Tarts
…………………………
What are Supply Shifters?
1. Resource Cost
• Wages and raw materials are resources
• If resource cost decreases – supply
increases
• If resource cost increases – supply
decreases
2. Alternative Output Change
Substitutes in Production
Producers want to produce more of the good
where price is increasing,
…or at least, where the price is not going
down.
3. Technological Improvement
• Because one person on a computer can
produce more documents, offices don’t have
to have as many secretaries.[saves $]
4. Number of Suppliers Changes
5. Producer Expectations
About Future Price
expect future oil prices to decline,
they will increase current production.
expect future oil prices to increase,
they will decrease current
production
6. Subsidies – free money
From the Government
• A benefit given by the government to
groups, companies or individuals usually
in the form of a cash payment or tax
reduction.
• The subsidy is usually given to remove
some type of burden and is often
considered to be in the interest of the
public.
• There are many forms of subsidies given out by
the government, welfare, housing loans, student
loans and farm subsidies.
• For example, if a domestic industry, like farming,
is struggling to survive in a highly
competitive international industry with low
prices, a government may give cash
subsidies to farms so that they can sell at the
low market price but still achieve financial
gain.
7. Taxes Take Away Business Profits
& Decrease Supply
If business have their taxes decreased,
it moves the supply curve to the right
(INCREASE SUPPLY)
If business have their taxes increased,
it moves the supply curve to the left
(DECREASE SUPPLY)