Post on 15-Jan-2016
Create shifts
For classwork credit:
There are ten total shifts (5 supply and 5 demand). Come up with a scenario for each.
Agenda
Bellringer
Review Questions
Check in: Supply and Demand together graph
Notes: Supply and Demand together
Midterm Thursday and Friday
Review Questions
Identify the determinants of demand BITER
Identify the determinants of supply RENTS
When more is produced than is demanded, what is the result?
Surplus
When less is produced than is demanded, what is the result?
Shortage
Supply and Demand Together Graphs
How did it go?
Are we finished?
Need more time?
Supply and Demand Together
Objective
Students will draw supply and demand curves and be able to identify equilibrium, surplus, shortage, and illustrate appropriate determinant shifts
Supply and Demand
In market and mixed economies, supply and demand work together to help the economy self-regulate
Adam Smith called this phenomenon the “Invisible Hand”
Supply and demand work together to determine prices and prices are the basis of most economic decisions
Supply and Demand Schedule
Graphing Supply and Demand
Graphing Supply and Demand
Same rules apply for when you graphed them separately. They make an “X”
“Mind your P’s and Q’s” (P(rice) on vertical axis, Q(uantity) on horizontal)
Demand is always downward sloping, Supply is always upward sloping
Always label supply curve (s) and demand curve (d). Search and destroy!
Graphing Supply and Demand
Working Together
Surplus: when there is more of an item supplied than is demanded. You have “extra”
Signal that price is too high – people don’t want to buy it
How do you alleviate a surplus? Drop the price!
Surplus
Surplus
Shortage
Shortage: quantity demanded is more than what is supplied. There is not enough to go around
Signals that prices are too low! Everyone is buying!
Solution: Raise the price
Surplus
Shortage
Add it all up…
When operating without any restrictions (Laissez-Faire) our market economy will self regulate
This means shortages and surpluses are automatically sorted out by price restructuring – the result is a perfectly balanced market/mixed economy
When an economy reaches equilibrium – it will stay there until either supply or demand shifts
EquilibriumEquilibrium: The price at which supply and demand meet
Equilibrium Equilibrium
Check for Understanding
Draw a standard supply and demand curve (be sure to label)
Label surplus
Label shortage
Label equilibrium
Shifting Together…
When given a scenario ask yourself “Does this affect supply or demand?”
Remember all of your determinants
Example: if a scenario is about technology, obvi it is a supply shift
Trickiest shifts: expectations! Must think of it from either a consumer or producer standpoint.
Shifting Together…
After you have determined which line will shift (supply or demand), using labels to identify which direction it will go
Write the determinant that is at work
If applicable – identify the new equilibrium price
Visual
1. The income of the Chapel Hill townies declines after an early loss during March Madness.
Quantity
Price
D
S
D1
P1
Q1
P2
Q2
2. Chapel Hill is named one of the most beautiful towns in North Carolina and tourism doubles
Quantity
Price
D
S
D1
P2
P1
Q1 Q2
3. The price of blue ties decreases. How does this affect demand for purple ties? (Blue ties are a substitute good for purple ties)
Quantity
Price
D
S
D1
P1
Q1
P2
Q2
4. The Federal government has been warning the public about the possibility of a recession and job loss in the RDU area.
Quantity
Price
D
S
D1
P1
Q1
P2
Q2
The price of silk increases (ties are made with silk).
Quantity
Price
D
S
P2
S1
P1
Q2 Q1
The government adds a subsidy to tie production.
Quantity
Price
D
S
S1
P1
Q1
P2
Q2
Purple ties are named by GQ magazine as a “must have” for all young professionals. At the same time, a new textile machine decreases the cost of producing purple ties.
Quantity
Price
D
S S1
D1
P1
Q1 Q2
Practice Complete the worksheet