PowerPoint PresentationSlide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39Slide 40Slide 41Slide 42Slide 43Slide 44Slide 45Slide 46Slide 47Slide 48Slide 49Slide 50Slide 51Slide 52Slide 53Slide 54Slide 55Slide 56Slide 57Slide 58HouseholdsBusinessesProduct MarketsFactor MarketsSelling Quantity Price Demanded$ 3$ 2$ 1$ 41025406015$ 5PriceQuantity$6$5$4$3$2$110 20 30 4050600DemandDownsloping left-Plot the pointsGraphing:-Connect the dotsto rightDemandSelling Quantity Price Supplied$ 3$ 2$ 1$ 46025151040$ 5PriceQuantity$6$5$4$3$2$110 20 30 4050600Upsloping right-Plot the pointsGraphing:-Connect the dotsto leftSupplySelling Quantity Price Demanded Supplied$ 3$ 2$ 1$ 41025406015$ 56025151040$ 32525PriceQuantity$6$5$4$3$2$110 20 30 4050600D-Plot DemandGraphing:-Plot SupplyDSSSelling Quantity Price Old New0$ 3$ 2$ 0$ 1$ 41$ 634652$ 51346527013452DecIncCaused by a Change in a DeterminantMovement OF the curvePriceQuantity$6$5$4$3$2$11 2 3 4560OldIncrease in Demand shifts out or to the rightDecrease in Demand shifts in or to the left1Why the curve shifts2345Consumer TastesPrice of Other GoodsConsumer IncomesNumber of ConsumersConsumer Expectations1Consumer Tastes-beanie hats make a comebackDemand increases-Hula Hoops go out of styleDemand decreasesOr why the curve shifts2Price of Other GoodsIf airlines cut ticket pricesMore demand for Luggage Less demand for train ticketsTickets and Luggage are compliments Airlines and Trains are SubstitutesIf ticket prices decrease, demand for Luggage increasesIf ticket prices increase, demand for Luggage decreasesIf air tickets increase, demand for Train tickets also increasesCompliments are consumed or used together (inverse relationship)Substitutes replace each other (direct relationship)If air tickets decrease, demand for Train tickets also decreases3 Consumer Incomes+tax cuts increase net incomesConsumers have more money to spend, demand increases-the $ depreciates against the EuroImported goods from Europe cost more dollars, demand decreasesFor Normal Goods!!!For Normal Goods!!!-the $ depreciates against the EuroDomestic travel looks better, demand increasesFor Inferior GoodsConsumers switch to better goods, demand for Hot Dogs decreases +tax cuts increase net incomes4Number of Consumers(also Demographics)-Hurricanes arrive on Labor Day weekendFewer tourists touring, demand decreasesCanada sells to 290 million US consumers, demand for their goods increases+NAFTANorth American Free Trade Agreement5 Consumer Expectations-dealers reduce car prices in AugustCar buyers wait, demand decreases-heavy rains have damaged coffee cropConsumers expect shortages and higher prices so they buy more now, demand increasesQuantity$6$5$4$3$2$11 2 3 4560SupplyCurrent EquilibriumPriceP1P2P3Q3Q1Q2Caused by a change in a Determinant of DemandShifting the Demand CurvedecreaseincreaseDemandP QP Q1Why the curve shifts2345Consumer TastesPrice of Other GoodsConsumer IncomesNumber of ConsumersConsumer ExpectationsSelling Quantity Supplied Price Old New6$ 3$ 2$ 1$ 45$ 63214$ 5754236431052DecIncCaused by a Change in a DeterminantMovement OF the curvePriceQuantity$6$5$4$3$2$11 2 3 4560OldIncrease in Supply shifts out or to the rightDecrease in Supply shifts in or to the left1Resource PricesWhy the curve shifts2Changes in Technology3 Prices of other goodsTaxes and Subsidies45 Number of Producers1Resource Prices-gas is discovered under CVCCSupply increases-Minimum wage goes upSupply decreasesOr why the curve shifts2Changes in Technology+ If a more powerful computer is developedMakes production easier (and cheaper)- If stronger pollution controls are requiredMakes production harder (and costly)3 Elements of Nature/Prices of other goodsShift resources away from high production cost goods.Caused by natural disasters or market price of other goods+ subsidies encourage productionTaxes and Subsidies- taxes discourage production45 Number of Producers-fewer firms decrease supply+more firms increase supply6 Producer Expectations-if prices are expected to increase, more productionabout prices and resource availability-if prices are expected to decrease, less production1Resource PricesWhy the curve shifts2Changes in Technology3 Prices of other goodsTaxes and Subsidies45 Number of Producers6 Producer ExpectationsConsumers responding to a Change in the Price of the goodCaused by factors related to production of the goodHarder or costlier to produce, price goes upMovement ALONG the curveQuantity$6$5$4$3$2$11 2 3 4560DemandSupply CurveCurrent PricePriceP QP QdecreaseincreaseEasier or less expensive to produce, price goes downWhat makes the Supply Curve Shift??P1P2P3Q2Q1Q3The Supply Schedule!!What makes the Supply Curve Shift??Quantity$6$5$4$3$2$11 2 3 4560DemandCurrent EquilibriumPriceP QP QdecreaseincreaseP1P2P3Q2Q1Q3SupplyCaused by a change in a Determinant of SupplyShifting the Supply CurveResponse to a Change in the Price of the goodCaused by factors related to consumersMovement ALONG the curveQuantity$6$5$4$3$2$11 2 3 4560SupplyCurrent PricePriceP1P2P3Q2Q1Q3Economic Examples• A reduction in the supply of unskilled labor … pushes the wage rates of fast-food workers upward.ResourcesMarketEmployment$7.50DRS1Price(wage)E1E2S2$6.25Resource Prices, and Product MarketsPriceProductMarketQ1DPQ2S1QuantityS2$2.25$2.00• Higher wages cause a reduction in supply. This leads to higher hamburger prices.2. Increase in the Demand for Loanable Fundsr2Q1r1Q2InterestrateQuantity of loanable funds• At the interest rate r the quantity of loanable funds demanded by borrowers into equals quantity supplied by lenders.• An increase in demand will move D1 to D2• Higher interest rates encourage additional savings, making it possible to fund more borrowing.the interest rises to r2 and increasing borrowing to Q2S D1 D2LendingBorrowing3. Increase in the Demand for Foreign Exchange0.20Q1Q2Exchange rate($ per quetzal)Quantity of quetzal exchangeS D1U.S. sales toGuatemalaU.S. purchasesfrom Guatemala D20.10• Begin in equilibrium, where the dollar price of the quetzal is $.10 (10 cents = 1quetzal).• An increase in American demand for Guatemalan coffee will also increase