Price
P
Quantity Demanded
Qd
$9
8
2
3
5
9
7
6
Price
P
Quantity Demanded
Qd
$9
8
2
3
5
9
7
6
P
9
8
7
6
To be on the
demand curve
a person must
be WILLING
and ABLE to
purchase the
product or service. 2 3
Qd
just a point on the
curve.
D
is the entire
curve.
5
9
Q
Price
P
Quantity Demanded
Qd
$9
8
2
3
5
9
7
6
There is an
inverse
___________
relationship
between price
and quantity.
P
9
8
7
6
Qd
just a point on the
curve.
D
is the entire
curve.
2 3
5
9
Q
9
8
7
6
Definitions:
D
2 3
5
9
Q
Quantity demanded--it is the amount that will be
purchased at a specific P.
Law of Demand– As price goes down,
consumers will buy more!
9
8
7
6
Qd
just a point on the
curve.
D
is the entire
curve.
2 3
5
9
Q
Price changes Quantity Demanded
Price DOES NOT CHANGE
DEMAND!!!!!!!!
Only one variable
Qd
PRICE
PRICE DOES NOT
DEMAND!!
Eight Determinants of Demand:
1. # of consumers
2. Income--Normal Goods
As people’s incomes go up demand for
normal goods increases. As people’s income
go down, demand for normal goods
decrease.
3. Income--Inferior Goods
As people’s incomes go up demand for
inferior goods decreases. As people’s income
go down, demand for inferior goods
increases.
With a partner, come up with
THREE inferior and THREE
normal goods!
______Used Furniture Store
______Lazy Boy Store
$25
Eight Determinants of Demand:
1. # of consumers
2. Income--Normal Goods
3. Income--Inferior Goods
4. Preferences
Eight Determinants of Demand:
1. # of consumers
2. Income--Normal Goods
3. Income--Inferior Goods
4. Preferences
5. Price of related products: Substitutes
Eight Determinants of Demand:
1. # of consumers
2. Income--Normal Goods
3. Income--Inferior Goods
4. Preferences
5. Price of related products: Substitutes
6. Price of related products: Complements
Eight variables that shift Demand:
1. # of consumers
2. Income--Normal Goods
3. Income--Inferior Goods
4.
5.
6.
7.
8.
Preferences
Price of related products: Substitutes
Price of related products: Complements
Expected future P’s by consumers
Expected future Y (Income) by consumers
What happens to the price of
gasoline when consumers think
the price of oil will go up?
• Speculation increases demand!
• The price goes up!
What device do consumers use to
buy stuff NOW when they expect
their future income will increase?
Review
•
•
•
•
Law of Demand
P____ Qd _____
P____ Qd _____
P changes _____, not _________.
The price of Coke doubles, what
happens to the market for Pepsi?
P
S
P1
P
D1
D
Q
Your market is: Pepsi
Q1
Q
Increase in
price of
related
product—
Substitute
What happens to the market for downloaded music
when the price of an MP3 player or Ipod goes down?
P
S
Decrease in
the price of
a complement.
P1
P
D1
D
Q
Your market is:
Q1
Q
Downloaded Music
New market research reveals that corn gives you
gas.
P
S
Change in
onsumer
preference
P
P1
D1
Q1
Your market is: Corn
Q
D
Q
The U.S. goes through a boom economy, what
happens to the market for steak?
P
S
Increase in
incomes—
Normal goods.
P1
P
D1
D
Q
Your market is: Steak
Q1
Q
What happens to the market for generic canned goods
When there is an income tax increase
P
S
Decrease in Y
Inferior good.
P1
P
D1
D
Q
Your market is:
Q1
Q
Generic canned vegetables
Demand Review
Pitbull comes out with a new ad campaign
P
S
Change
in
preferences
P1
P
D1
D
Q
Q1
Q
Your market is: Pitbull CD’s
Immigrants leave the state of GA due to new
immigration law
P
S
Change in
# of consumers
P
P1
D1
Q1
Q
D
Q
Your market is: Authentic Hispanic food products
Recession worsens, what
happens to the market for second hand clothes?
P
S
Decrease in
incomes—
inferior goods.
P1
P
D1
D
Q
Q1
Q
Your market is: Second hand clothes
Price
P
Quantity Supplied
Qs
$6
7
2
3
5
9
8
9
P
S is the entire
curve.
Qs
Definitions:
just a point on the
curve.
Q
Quantity supplied--it is the amount that will be
sold at a specific P.
Law of Supply – Sellers tend to offer more of a
good at a higher price!
P
S is the entire
curve.
Qs
just a point on the
curve.
Q
Price changes Quantity Supplied
Price DOES NOT CHANGE
SUPPLY!!!!!!!!
Only one variable
Qs
PRICE
PRICE DOES NOT
SUPPLY!!
GUESS HOW MANY
DETERMINANTS OF
SUPPLY THERE ARE?
5
And if you don’t memorize these variables, YOU
WILL FAIL THIS CLASS!!
ARE THERE ANY QUESTIONS?
Five determinants of Supply:
1. # of suppliers
2. Costs
3. Physical Availability of Resources
4. Technology
5. Expected Future Prices by Suppliers
Review
• Law of Demand = P Qd ____
= P Qd ____
• Law of Supply = P ___Qs
= P ____ Qs
• What variable changes Qd?
• What variable changes Qs?
You can MAKE MONEY by knowing
the laws of supply and demand.
Major Drought
Hits Brazil
Draw a supply and demand graph
showing how I made my money!
Zit’s Coffee Shop (beans
and grinds)
Write what happened in flow chart form
You can SAVE MONEY by knowing
the laws of supply and demand.
P
How did the terms
P’s and Q’s come
about?
Q
In English pubs, ale is ordered by pints and
quarts.
So in old England, when customers got
unruly, the bartender would yell at them
mind their own pints and quarts and settle
down. It's where we get the phrase "mind
your P's and Q's"
There are four steps in figuring out supply
and demand graphs:
1. DON’T THINK!
2. Which curve is affected and why?
3. Is it an increase or a decrease?
4. JUST DRAW IT!
What happens to the market for oranges when
there is a frost that hits Florida?
S1
P
S
Decrease in
the physical
availability
of resources.
P1
P
D
Q1 Q
Your market is:
Oranges
Q
What happens to the market for downloaded
music when the royalties paid to the song
artist goes
up?
S1
P
S
Increase in
costs.
P1
P
D
Q1 Q
Your market is:
Q
Downloaded Music
U.S. automakers use robots to produce its
cars, what happens to the market for
foreign automobiles?
P
S
Price of
related
product—
substitute.
P
P1
D1
Q1
Q
Your market is: Foreign autos
D
Q
Questions for Supply and Demand
Assume that the economy of the
country of Alpha is experiencing
increasing unemployment. Steak is
considered a normal good in Alpha.
Using the supply and demand graph
illustrate the impact of the increasing
unemployment on the market for steak
in Alpha.
Assume that the economy of the
country of Alpha is experiencing
increasing unemployment. Hamburger
is considered an inferior good in
Alpha. Using the supply and demand
graph illustrate the impact of the
increasing unemployment on the
market for hamburger in Alpha.
The country of Alpha experiences an
increase in immigration that leads to an
additional one million consumers.
What will be the affect on this
immigration on Grog the popular drink
of Alpha. Illustrate the impact on price
and output using a supply and demand
graph.
A plague has a devastating impact on
the population of Alpha. Illustrate
using a supply and demand graph how
this will impact the market for chicken.
Review
• Law of Demand = P Qd ____
= P Qd ____
• Law of Supply = P ___Qd
= P ____ Qd
• What variable changes Qd?
• What variable changes Qs?
I want to talk about two products for the next
ten minutes.
Insulin and Bicycles
Every morning, millions of diabetics give
themselves a shot of insulin just to stay alive.
In the U.S., there are
over 10 million diabetics,
110 million worldwide.
(2001)
Now you say to yourself
again, so what do
insulin and bicycles
have in common?
Diabetics ride bicycles.
P
P
$300
$3
$2
$200
$1
$100
D
10 m
Insulin
Q
D
100 200
500 Q
Bicycles
P
$3
INELASTIC
P
ELASTIC
$300
$2
$200
$1
$100
D
D
10 m
100 200
500 Q
Q
Insulin
Bicycles
Five (4) tests for figuring elasticity of demand:
Few substitutes
Many substitutes
One has few substitutes and
one has many?
Necessity
Luxury
One is a necessity and the other is a luxury?
Inexpensive
Expensive
One is expensive and the other
is inexpensive
I am going to name a product and you let
me know if the demand for the product is
elastic or inelastic:
Pizza
Hamburger
Gasoline
New Homes
Cars
Cancer drugs
Chewing gum
Corn
Perfectly inelastic; Ed = 0
What is an example?
Inelastic demand; Ed < 1
Why?
Unit Elastic Demand; Ed = 1
Elastic Demand; Ed > 1
Why?
Perfect Elastic Demand; Ed =
infinite
REVIEW
What are the three tests for
determining elasticity of demand?
Elastic (bicycles)
1.
2.
3.
4.
Many substitutes
Luxury
Expensive
Total revenue test
P goes up, TR goes down
P goes down, TR goes up
Inelastic (insulin)
1.
2.
3.
4.
Few substitutes
Necessity
Inexpensive
Total revenue test
P goes up, TR goes up
P goes down, TR goes
down.
ELASTICITY COEFFICIENT
Elastic (bicycles)
Ed > 1
Inelastic (insulin)
Ed < 1
Ed = 1 is unit elastic
To figure out the coefficient, you must know the
formula for Elasticity of Demand… but it is not
In scope for this course!
Summary - Elasticity
What is it?
What is it not?
Where will I see
this word?
What is one word I
can use to
remember this
concept?
Ed = the percentage change in quantity demanded
divided by the percentage change in price.
Simplify this formula.
Ed = %
%
in Qd
in P
Ed = %
%
%
in Qd
How do you figure out
the numerator?
How do you figure out
the denominator?
NUMERATOR
in Qd =
in Qd
Like Levi’s,
always use
Qd
the original.
in P
DENOMINATOR
%
in P
=
in P
P
Like Levi’s,
always use
the original.
Ed =
in Qd
Qd
in P
P
SIMPLIFY ONE LAST TIME:
Ed =
in Qd
Qd
P
in P
There are 5 steps in figuring out the
elasticity coefficient:
1. Write down the formula.
2. DO NOT use negative numbers.
3. Fill in the ORIGINAL numbers FIRST.
4. Fill in the other two numbers.
5. Know the answer--Ed > 1 ELASTIC
Ed < 1 INELASTIC
P of Widgets
Qd
10
9
8
7
6
5
4
3
2
1
0
40
80
120
160
200
240
280
320
380
What is the elasticity
coefficient going from
$2 to $3?
P of Widgets
Qd
10
9
8
7
6
5
4
3
2
1
0
40
80
120
160
200
240
280
320
380
What is the elasticity
coefficient going from
$3 to $2?
P of Widgets
Qd
10
9
8
7
6
5
4
3
2
1
0
40
80
120
160
200
240
280
320
380
What is the elasticity
coefficient going from
$8 to $9?
P of Widgets
Qd
10
9
8
7
6
5
4
3
2
1
0
40
80
120
160
200
240
280
320
380
What is the elasticity
coefficient going from
$9 to $8?
ELASTICITY QUESTIONS
1. Mr. Lopez is a butcher who recently raised the
price of steak at his market from $1.50 to $2.00
a pound. Correspondingly, his sales dropped
from 200 pounds per day to 100 pounds per
day. Figure out the elasticity of demand for
steak at Lopez’ market. Is it elastic or
inelastic?
in Qd
Qd
P
in P
2. At 25 cents apiece, Mr. Blackman sells 100
chocolate bars per week. If he drops his price
to 20 cents, his weekly sales will increase to
110 bars. Is the demand for chocolate bars
elastic or inelastic? Prove your answer.
in Qd
Qd
P
in P
3. Suppose that 30 tons of coal are purchased at
a price of $20 per ton and 50 tons are purchased
at $15 per ton. What is the elasticity coefficient
in this example? If we converted tons to pounds,
would the measurement of the elasticity
coefficient change?
in Qd
Qd
P
in P
Review
• Draw a perfectly inelastic curve. Name one
example.
• What is an example of an inelastic good?
• What is an example of an elastic good?
• Draw a perfectly elastic curve
• What are four tests for determining
elasticity? How do you reconcile multiple
effects?
P
S
$1,600
Pc are set
BELOW the
equilibrium
price.
P
D
Q
Q
Pc is the
highest price
that can be
charged in the
market.
Fair market price of apartments in NYC is $1,600
NYC has rent controls which are price ceilings. Where do you think price
CEILINGS are set? BELOW or ABOVE the market price?
P
S
$1,600
P
Pc
$1,200
D
Q
Q
Rent controls are a price set by the government to
keep prices of apartments down. In NYC the
government sets the HIGHEST PRICE that can be
charged for a one-bedroom apartments at $1,200.
Landlords cannot charge above this price.
P
S
$1,600
P
$1,200
Anytime
Qd > Qs
there is a
SHORTAGE
in the
market.
Pc
D
Qs
QQ
<
Qd
Q
Looking at the graph, what occurs when the price is
set BELOW the equilibrium price when a PRICE
CEILING is set?
The Quantity Demanded > the Quantity Supplied
This is the number
of apartments landlords
are willing to supply at
this price (Qs).
This is the number of
people willing to
rent apartments at
this price (Qd).
S
P
$1,600
P
Pc
$1,200
D
Qs
<QQ Qd
This is a SHORTAGE.
Q
P
S
$1,600
P
Pc
$1,200
D
Qs
<QQ Qd
Q
Do you think people ever pay more than $1200 for an apt in NYC?
PRICE CEILING—THE HIGHEST PRICE THE
SELLER CAN SELL THE
PRODUCT.
P
$1,600
S
P
Pc
$1,200
D
Qs
<QQ Qd
Q
S
$50
$0
D
Qs
3,000
Pc
To fly from Chicago to
Minneapolis it cost
In 1975
Minneapolis
San
Fran.
$169
Chicago
$69
Los Angeles
To fly from Los Angeles
to San Francisco it cost
WHY?
In 1975
This is INTERSTATE
travel.
Minneapolis
San This is INTRASTATE
Fran. travel. (inside the state)
$169
Chicago
$69
Los Angeles
Roughly the same number of people were flying
between these two destinations and roughly the same number
of airplanes were flying these two routes. So why such a
difference in the prices of these airfares? What is different
between these two routes?
P
S
Pf
P
D
Q
Q
Interstate travel was regulated by the Civil
Aeronautics Board. It set the prices for flights
traveling across state lines. It set a PRICE FLOOR.
Where is a PRICE FLOOR set? Above or BELOW
the equilibrium price?
ABOVE.
P
S
Pf
P
D
Q
Q
Why is it called a price FLOOR if it is set ABOVE
the equilibrium/market price?
Because it is the LOWEST price that can be charged
by law.
S
P
$169
$69
Pf
P
$169
D
$69
Q
Q
Which route is the market price and which route
is the PRICE FLOOR?
The market price is $69, the price charged between
Los Angeles and San Francisco.
The PRICE FLOOR is $169, the price charged
between Chicago and Minneapolis.
$169
$69
S
P
Whenever there is
a PRICE FLOOR
the Quantity
Supplied is
greater than the
Quantity Demanded.
$169
$69
Pf
P
D
Qd
Q
<
Qs
Q
$169
Qd of
seats
$69
<
Qs of
seats
S
P
$169
A price floor
causes a
SURPLUS
in the market.
Pf
$69 P
D
Qd
Q
<
Qs
Q
$169
$69
Pf
P
D
Qd
Q
<
Qs
Q
What price did the airlines charge customer flying
from Chicago to Minneapolis?
$169
If airlines couldn’t compete by price since they
all charged the same price, how did airlines compete?
Service:
Best food, bigger seats, prettiest flight
attendants.
http://www.1jetsettravel.com/Picts/22Plncbn.jpg
Surplus of seats
available because
of the price floor.
http://www.transport-pf.or.jp/english/sky/airplane/exploration/img/jal-mesi.jpg
Airlines competed by
serving better food.
Prettiest stewardess
As deregulation of the airline industry took
place in 1978, what happened to the price
floor?
S
P
$169
Pf
$69 P
D
Qd
Q Qs
Q
The price floor is eliminated, lowering the price to the market price. This
gets rid of the surplus. People get to fly for lower prices, but the airplanes
are now more crowded.
Summary
• Draw a graph showing the minimum wage
– What does it do to unemployment?
– Should we still have a minimum wage law?
– Why or why not?
What type of products do they target for excise taxes?
*The Federal Tax of 18.4 cents per
gallon is collected in all states in
addition to any state or local taxes on
gasoline sales.
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Dist. of
Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Tax/Cents per
gallon*
18
8
18
21.5
18
22
25
23
20
14.1
7.5
16
25
19
18
20.1
23
State
Montana
Nebraska
Nevada
New
Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Tax/Cents per
Gallon*
27.75
24.6
23
18
14.5
17
29.65
23.4
21
22
17
24
25.9
30
16
22
20
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
23
15
20
22
23.5
21.5
19
20
18
17
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Federal Tax
Rate
20
20
24.5
20
17.5
23
20.5
31.1
14
18.4
Telephone?
This tax adds three percent to the cost of the
telephone bill of consumers. If a consumer has
a monthly bill for local and long-distance service
totaling $100, an additional $3 is applied to the
bill with the result that the consumer must pay
$103, although the actual charge for service
amounted to $100.
In fiscal year 1999, the telephone excise tax
provided $5.2 billion to the Federal Treasury.
Cigarettes?
Current Cigarette Excise Tax Rates
Current State Cigarette Tax Average: $1.069 per pack
Sorted By Tax Rate
Sorted By Tax Rate
Sorted By State Name
State
Tax Rate
(per pack of 20)
New Jersey
$2.575
Rhode Island
$2.460
Washington
$2.025
Alaska
$2.000
Maine
$2.000
Arizona
$2.000
Michigan
$2.000
Connecticut
$2.000
Vermont
$1.790
Montana
$1.700
Hawaii
$1.600
South Dakota
$1.530
Massachusetts
$1.510
New York
$1.500
Minnesota
$1.490
Texas
$1.410
Iowa
$1.360
Pennsylvania
$1.350
Ohio
$1.250
Oregon
$1.180
Delaware
$1.150
New Hampshire
$1.080
Oklahoma
$1.030
Maryland
$1.000
District of Columbia
$1.000
Indiana
$0.995
Illinois
$0.980
New Mexico
$0.910
California
$0.870
Colorado
$0.840
Nevada
$0.800
Kansas
$0.790
Wisconsin
$0.770
Utah
$0.695
Nebraska
$0.640
Tennessee
$0.620
Wyoming
$0.600
Arkansas
$0.590
Idaho
$0.570
West Virginia
$0.550
North Dakota
$0.440
Alabama
$0.425
Georgia
$0.370
Louisiana
$0.360
North Carolina
$0.350
Florida
$0.339
Kentucky
$0.300
Oklahoma
$1.030
Maryland
$1.000
District of
Columbia
$1.000
Indiana
$0.995
Illinois
$0.980
New Mexico
$0.910
California
$0.870
Colorado
$0.840
Nevada
$0.800
Kansas
$0.790
Wisconsin
$0.770
Utah
$0.695
Nebraska
$0.640
Tennessee
$0.620
Wyoming
$0.600
Arkansas
$0.590
Idaho
$0.570
West Virginia
$0.550
North Dakota
$0.440
Alabama
$0.425
Georgia
$0.370
Louisiana
$0.360
North Carolina
$0.350
Florida
$0.339
Kentucky
$0.300
Virginia
$0.300
Mississippi
$0.180
Missouri
$0.170
South Carolina
$0.070
Alabama
$1.70
Yes
Alaska
2.50
n.a.
Arizona
0.84
Yes
Arkansas
0.75
Yes
California
0.20
Yes
Colorado
0.32
Yes
Connecticut
0.60
Yes
Delaware
0.97
n.a.
Florida
2.25
Yes
Georgia
1.51
Yes
Wine Tax
Federal Excise Taxes
Weird Taxes
A police chief of a major city stated the following:
“There is 20 percent less heroin coming into
the city. This means there will be fewer
drug-related crimes.”
Draw a supply and demand graph for heroin
and show the fallacy in this thinking.
Each batter will get the board and draw a supply
and demand graph.
The umpire (Mr. Zittle) will give you the market;
write it at the bottom of the supply and demand
graph.
S
P
D
Q
Sample Inning:
Your market is: Baseball tickets
Your questions is: The town size has doubled in
the past year, what will most likely happen to
the price and quantity of baseball tickets?
S
1. Don’t think!
2. Which curve is affected?
P1
3. Is it an increase or
a decrease with that P
curve?
D1
4. Just draw it!
D
Demand because the
number of consumers .
Q Q1
Price and quantity
Baseball Tickets
1st Inning
Your market is:
Paper Plates
Your question:
Millions of acres of forest land
are burned. What happens to
the market for paper plates?
1st inning
Millions of acres of forest
land are burned. What
happens to the market
for paper plates?
S1
P
S
P1
P
Answer:
Costs
Supply shifts
to the left.
P Q
D
Q1 Q
Paper Plates
Q
2nd Inning
Your market is:
Most goods and services
Your question:
Gas prices go up in the
economy. What happens to
the market for most goods
and services?
2nd Inning
Gas prices go up in the
economy. What happens to
the market for most goods
and services?
S1
P
S
P1
Answer:
P
Availability of
natural resources
Supply shifts
to the left.
P Q
D
Q1 Q
G&S
Q
3rd Inning
Your market is:
Doctors
Your question:
The medical exam to become
a doctor becomes more
difficult. What happens to
the market for doctors?
3rd Inning
The medical exam to become
a doctor becomes more
P
difficult. What happens to
the market for doctors?
S1
S
W1
W
Answer:
Number of suppliers
D
Supply shifts
to the left.
W Q
Q1 Q
Doctors
Q
4th Inning
Your market is:
Walgreens Aspirin
Your question:
The price of Bayer
aspirin goes down. What
happens to the market for
Walgreens Aspirin?
The price of Bayer
aspirin goes down.
What happens to the
market for
Walgreens Aspirin?
4th Inning
P
S
P
P1
Answer:
Price of a substitute
(Bayer)
Demand shifts to
the left
P Q
D1
Q1 Q
D
Q
Walgreens Aspirin
5th Inning
Your market is:
New houses in Ohio
Your question:
Millions of acres of timberland
in Oregon are burned. What
happens to the market for new
houses in Ohio?
Millions of acres of
timberland in Oregon
is burned. What
happens to
the market for
new houses in
Ohio?
5th Inning
S1
P
S
P1
P
Answer:
costs
D
Q1 Q
Supply shifts
to the left.
P Q
Q
New houses in Ohio
6th Inning
Your market is:
Clothes in secondhand stores
Your question:
The economy starts going
through a boom period. What
happens to the market for
clothing in secondhand stores?
6th Inning
The economy starts
going through a
boom period. What
happens to the
market for clothing
in second-hand stores?
P
S
P
P1
Answer:
Income inferior goods
D1
Q1 Q
Demand shifts
to the left.
P Q
D
Q
Clothing in secondhand store
Alternative answer next slide.
The economy starts
going through a
boom period. What
happens to the
market for clothing
in second-hand stores?
6th Inning
P
S
S1
P
P1
Answer:
D
Physical availability
of resources (clothes)
Q Q1
Q
Supply shifts to
Clothing in secondhand store
the right.
P Q
Alternative answer
7th Inning
Your market is:
Houses
Your question:
Interest rates go up.
What happens to the
market for houses?
Interest rates for go up.
What happens to the
market for houses?
7th Inning
P
S
P
P1
Answer:
preferences
D1
Q1 Q
Demand shifts
to the left.
P Q
D
Q
Houses
Alternative answer next slide.
Interest rates for
mortgages go up.
What happens to the
market for houses?
7th Inning
S1
P
S
P1
P
Answer:
Cost of building
homes goes up.
Supply shifts
to the left.
P
Q
D
Q1 Q
Q
Houses
Alternative answer
8th Inning
Your market is:
Copper piping
Your question:
Millions of acres of timberland
are burned. What happens to
the market for copper piping?
Draw three supply and demand
graphs with the last one being
the market for copper piping.
You figure out what the other
two supply and demand graphs
should be.
8th Inning
Millions of acres of
timberland are burned. P
What happens to
the market for
P1
copper piping?
P
S1
S
Answer:
Physical availability
of wood.
Supply shifts
to the left.
P Q
D
Q1 Q
Wood
Q
8th Inning
Millions of acres of
timberland are burned. P
What happens to
the market for
P1
copper piping?
P
S1
S
Answer:
Cost of building
Supply shifts
to the left.
P
Q
D
Q1 Q
Houses
Q
Millions of acres of
timberland are burned.
What happens to
the market for
copper piping?
8th Inning
P
S
P
Answer:
P1
Price of a complement
(copper pipes
complement a house)
Demand shifts
to the left.
P
Q
D1
Q1 Q
Copper Piping
D
Q
AP 9th inning
All team members to the board and
DO NOT draw anything on the board
until I read the question.
This statement came out in the school
announcements:
“The yearbook staff only order 350 yearbooks
for this year. Due to this shortage, the price
of the yearbook will be raised from $28 to $30.
If you would like to buy a yearbook, please stop
by the business office.”
Draw a graph of what this statement is saying.
AP 9th Inning
P
S
$30
$28
D
Qs Qd
Yearbooks
Q
Public opinion polls
9th Inning
show the economy
P
will improve in the short
term
S
P1
P
D1
Answer:
Expectations of future Y
D
Q Q1
Demand shifts to
the right.
P Q
Q
Demand for most G&S
P
S
S
Quantity
will definitely
increase.
P1
P1
P
D1
D
Q
Increase in demand
Increase in supply
Q1 Q1 Q
Price is
Indeterminate
It will either
go up.
P
S
P1
S
Quantity
will definitely
increase.
D1
Price is
Indeterminate
P
P1
D
Q
Increase in demand
Increase in supply
Q1
Q1
It stayed the
same.
P
S
Quantity
S will definitely
increase.
P1
P
P1
D1
D
Q
Increase in demand
Increase in supply
Q1
Q1
Price is
Indeterminate
It went down.
What happens to the price and quantity if there
is an increase in demand and a decrease in supply?
Price definitely goes up; Quantity is indeterminate
What happens to the price and quantity if there
is a decrease in demand and an increase in supply?
Price definitely goes down; Quantity is indeterminate
What happens to the price and quantity if there
is a decrease in demand and an decrease in supply?
Price is indeterminate; Quantity will definitely decrease