Chapter 3: Supply and Demand – DEMAND
Wake Up and Don’t Smell the Coffee (p. 61) Why did Starbuck’s raise the price of coffee in 2006?
___________
__________________________________________________________________________________________
Supply and Demand: A Model of a Competitive Market – What is a competitive market? What is the key
feature of such a market? What types of markets are not competitive? _______________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
The Demand Curve – Generally, the higher the _________________ of a good or service, the lower the
___________________ demanded by a consumer. This makes the demand curve _________________
sloping.
A demand curve is the graphical representation of the _______________________
______________________, which takes the form of a chart of different quantities
______________________ at different _______________.
Because quantity demanded is always inversely related to price, economists call this the ____ ___
___________.
Shifts of the Demand Curve – What two factors had caused demand for coffee to shift right between 2002
and 2006?
____________________________________________________________________________________
When the demand curve shifts, the result is a completely new __________________
_____________________.
When the demand curve shifts, we say there has been a change in _____________________. When there
has been a movement along a demand curve, was say there has been a change in _____________
_______________.
A movement along a demand curve is caused by a change in ____________________. Note that though the
chapter has not yet addressed the supply curve, a change in price is caused by a __________ in the supply
curve.
When this happens, we have a new supply schedule, but not a new ____________________ schedule. Get
it?
Understanding Shifts of the Demand Curve – The five most important factors that shift the demand curve
are captured with the acronym R-I-T-E-N. This stands for change in the price of R_________ ________,
change in I_________, change in T________, change in E________________, and change in
N____________ of consumers. When the demand curve shifts right, the result is a higher _________ and a
higher ___________.
Changes in the P of Related Goods and Services – Products are defined as substitutes for each other if _______
___________________________________________________. List examples of substitutes in your own life:
1____________________________2_____________________________3______________________________
Products are defined as complements if
__________________________________________________________
___________________________________ List examples of complements in your own life:
1_______________
__________________2__________________________________3____________________________________
Changes in Income – A rise in consumers’ income causes demand for ____________________ goods to shift
________________. A decrease in consumers’ income causes demand for _______________________ goods
to shift right. List examples of normal goods in your own life:
__________________________________________
Why are they normal? _________________________________________________ List examples of inferior
goods in your own life: ____________________________________________________ Why do you refer to
them as inferior (economically)?
________________________________________________________________
Changes in Tastes – How do economists define changes in tastes?
____________________________________
________________________________ List examples of changes in tastes that you have experienced in your
own life. __________________________________________________________________________________
What would be the impact on the demand curve of each?
____________________________________________
Changes in Expectations – Describe how changes in expectations as to price affect demand.
_______________
_______________________________________________________ Describe how changes in expectations as
to income affect demand.
_____________________________________________________________________
Changes in the Number of Consumers – The demand curve is the _______________________ ________ of all
individual demand curves. When there are more consumers, the demand curve shifts __________________.
CYU 3-1, 1. For each, write shift or movement along a curve, and describe why.
a.
b.
c.
d.
e.
Page 90 – Complete problem 2 in the space below.
Chapter 3: Supply and Demand – SUPPLY
The Supply Curve – The supply curve will tell us that the higher the price, the greater the ______________
supplied. Note immediately that if the increase in price is caused by a shift in the demand curve, the
increased supply is intended to meet this demand, and will not by itself affect the ____________. Big
point. Deep breath.
The Supply Schedule and the Supply Curve - The supply curve is the graphical representation of the supply
_______________. The supply curve will slope _________________ because the higher the
______________, the higher the _____________________ supplied. This is going to be easy for a bit here,
eh?
Shifts of the Supply Curve - When there is a shift in the supply curve, we have a new supply
________________ based on a new set of circumstances. When there is a movement along the supply
curve, there has been a change in _______________ (which is caused by a shift in demand that is not
represented on a graph with only supply).
Understanding Shifts of the Supply Curve - When economists talk about an increase in supply, there has
been a shift to the _________ of the supply curve. A decrease in supply corresponds with a shift to the
____.
Changes in Input Prices – Describe how the price of inputs can affect the supply curve.
___________________
__________________________________________________________________________________________
Changes in the P of Related Goods and Services – Products are defined as substitutes in production for each
other if __________________________________________________________. Come up with an example of
a substitute in production that you can think of:
____________________________________________________
Products are defined as complements in production if ______________________________________________
____________________________________________________ Come up with an example of a complement
in production that you can think of:
______________________________________________________________
Changes in Technology – Describe how a change in technology can cause the supply curve to shift.
_________
__________________________________________________________________________________________
Changes in Expectations – Read the paragraph, but focus on the last few sentences. What is the rule for the
impact on the supply curve of a producer’s expectations?
____________________________________________
__________________________________________________________________________________________
Changes in the Number of Producers - How does a change in the number of producers affect the supply
curve?
__________________________________________________________________________________________
__________________________________________________________________________________________
CYU 3-2, 1. For each, write shift or movement along a curve, and describe why.
a.
b.
c.
d.
e.
Supply, Demand and Equilibrium – How are equilibrium price and equilibrium quantity determined? Why
is this called the market-clearing price? ______________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
Why do all sales and purchases in the market take place at the same price?
______________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
Why does the market price fall if it is above the equilibrium price?
_____________________________________
__________________________________________________________________________________________
Why does the market price rise if it is above the equilibrium price?
____________________________________
__________________________________________________________________________________________
CYU 3-3, 1. a.
b.
c.
Page 90, Problem 1. a.
b.
c.
d.
Problem 3. a.
b.
c.
Problem 4.a.
b.
c.
d.