Power Point Notes on Supply Demand Concepts

Introduction to Business
Intro to Supply and Demand
Economic Resources (factors of production)
Definition: Resources needed to provide goods/services to consumers
Natural Resources: raw materials that come from the earth, water and
air. (e.g. soil, iron ore, gold, oil, trees, wildlife, agricultural products, fish,
Human Resources
the people who work to create the goods and
services (e.g. farmers, factory workers,
construction workers, website designers,
teachers, nurses, pilots)
Capital Resources: resources that last for a long period of time and
require investment on the part of the business (e.g. buildings,
equipment, tools, trucks and factories)
Economic Resources
In most cases, it takes a combination of all 3 economic
resources to create the goods and services that businesses
What happens if there is not enough of an economic
resource? (i.e. Oil)
The price of the good/service increase
Alternatives must be found for the resource
Demand and Supply
I am selling my I-Pod
 Who would like to buy it?
 What will you pay for it?
 the quantity of goods or service that
consumers are willing and able to buy at a
particular price.
Demand and Supply
Law of Demand
 Usually consumers will increase the demand
of a good or service as price decreases (which
goods might this not apply to?)
 Demand↑ as
What Creates Demand?
1. Consumer is aware of or interested in the good or
service (business do this by advertising)
2. Ample supply of the good/service
3. Price is reasonable and competitive
4. The good/service must be accessible.
What Affects Demand?
Change in consumers’ income (increase in income
usually means more goods/services are purchased,
however it could mean less)
Change in consumers’ tastes (why don’t people
buy neon pink headbands anymore?)
Changes in what we expect in the future (e.g. if we
think the price will decrease, we’ll wait to buy)
Change in population (why was this school built?
why are more retirement homes being built?)
Discussion Questions
2012 – Electronic Trends
1. Think of the things that you and your friends buy or would like to buy.
What products are in high demand among your age group?
Why are they in demand?
Think of examples from the
 Fast food industry…
 Entertainment industry…
 Travel industry…
 Automotive industry…
 Recreation/sports industry…
2. Explain how a change in prices of related (complementary) goods affects
Definition: the quantity of a good
or service that businesses are
willing and able to provide within a
range of prices that people would
be willing to pay
Law of Supply: ↑S as ↑P
Usually as prices increase,
producers will increase the
quantity of goods they provide
Quantity Supplied
Conditions that Affect Supply
A change in the number of producers (more producers
increases the supply of goods and usually decreases
the price)
Eg. Sony sold the first CD Player in 1982 for a retail price of over $900.
How much are they now?
Conditions that Affect Supply
Price of related goods (if gas prices increase, people may buy
more energy efficient cars)
Change in Price (If price decreases, production may too)
Change in technology (VCR sales vs. DVD sales)
Change in expectations
Change in cost of production (if you provide a lawn cutting
service and the price of mowers increases – continue only if you
can charge more!)