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# Demand and Supply - PowerPoint PPT Presentation

Demand and Supply. Revisited Along with elasticity, shifters, equilibrium & disequilibrium. The Law of Demand. P. QD. As the Price for a good or service increases, the Quantity Demanded Decreases Example Candy Auction. All of the Prices paired with the Quantities Demanded = Demand

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### Demand and Supply

Revisited

Along with elasticity, shifters, equilibrium & disequilibrium

As the Price for a good or service increases, the Quantity Demanded Decreases Example Candy Auction

• All of the Prices paired with the Quantities Demanded = Demand

• Price can only indicate a change in the quantity demanded– It cannot change Demand

• Only Six (6)things can change Demand

• ▲ Income, ▲Population, ▲Tastes & Preferences

• ▲Consumer Expectations, ▲Price of Substitutes

• ▲Price of Complements

What could change this graph? Demanded Decreases Example Candy Auction

Change in Demand

• Elastic Demanded Decreases Example Candy Auction

• Inelastic

• How sensitive to a change in price is the change in the quantity demanded?

Elasticity of Demand: What Makes the Slope of the Line change?

The Law of Supply Demanded Decreases Example Candy Auction

P

QS

As the price for a good or service increases, the quantity supplied also increases P Q

• All of the Prices paired with the Quantities Supplied = Supply

• Price can only indicate a change in the quantity supplied– It cannot change Supply

• Only Six (6) things can change Supply

• ▲ Cost of Inputs, ▲# of Producers,

• ▲Producer Expectations, ▲Technology

• ▲Government Policy, ▲Natural Events/Disasters

How do you Know when the Price is Right? supplied also increases P Q

• Equilibrium QD & QS Intersect at the Same Price 

. Equilibrium point

Price Controls =Government Involvement supplied also increases P Q

• Price Floor = price set above Equilibrium

Surplus

Shortage

Price Ceiling = Price set below Equilibrium