Supply and Demand - AP

Supply and Demand - AP - Mr.Marzen APMacroeconomics...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Mr. Marzen AP Macroeconomics Demand and Supply
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Price and Quantity Price – the amount of money paid for  an economic good/service Ex. A gallon of gasoline has a price of  $3.00 Quantity – the amount of items Ex. If I buy a dozen eggs, then the quantity  is 12 eggs
Background image of page 2
Demand Consumers’ willingness and ability to buy  an item at a given price Willingness means that buyers must want the  item Ability means that buyers must have the  financial resources to afford the item It is important to understand that demand  does not refer to a numerical amount but  instead to a behavior.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Law of Demand The price of an item determines the quantity  demanded The lower the price the higher the quantity  demanded When goods/services are cheap, I tend to buy more The higher the price the lower the quantity  demanded When goods/services are expensive, I tend to buy less Therefore, the price of a good/service is inversely  related with the quantity demanded
Background image of page 4
3 Reasons Why the Law of  Demand Exists 1. Income Effect When things are expensive, money buys less When things are cheap, money buys more 2. Substitution Effect When apples are expensive and their substitutes (pears) are  relatively cheap, I buy fewer apples and more pears 3. Diminishing Marginal Utility Each additional unit of an item purchased gives less marginal  utility (happy points) than the previous unit. Therefore, the only  way I will buy more is if the price is lower. Ex. When I’m hungry, I typically will buy 2 breakfast tacos. The  reason I don’t buy a third taco is because the marginal utility of  the third taco is less than the price of the taco. But, if the price of  the taco is less than the marginal utility of the taco, then I will buy  the third taco
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Demand Schedule Mr. Marzen’s Demand  for Breakfast Tacos Price Quantity $2.00 0 $1.50 1 $1.00 2 $0.50 3 Notice that Mr. Marzen is  obeying the law of demand.  Now that’s making a good  choice!!!!
Background image of page 6
Mr. Marzen’s Demand for Breakfast Tacos P Q D Demand Curve Price Quantity $2.00 0 $1.50 1 $1.00 2 $0.50 3 0 3 $2.00 $0.50 $1.00 $1.50 2 1
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Changes in Demand Increase in Demand More quantity demanded at all prices Demand Curve shifts  Decrease in Demand Less quantity demanded at all prices Demand Curve shifts  Know that Price does not change Demand!
Background image of page 8
P Q D D 1 Increase in Demand
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
P Q D 1 D Decrease in Demand
Background image of page 10
Changes in Demand T.R.I.P.E. The following cause the entire demand 
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/14/2011 for the course ECON 2302 taught by Professor Ross during the Spring '09 term at Central Texas College.

Page1 / 53

Supply and Demand - AP - Mr.Marzen APMacroeconomics...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online