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