It s the Law Supply and Demand Economics LAP

It’s the Law Supply and Demand Economics LAP 11

Objectives Explain the nature of supply and demand. Explain factors that affect supply and demand.

Explain the nature of supply and demand.

• New smartphone release • Supply and demand • Affects businesses and you

Why Are Coffee Shops Popular? • Demand for the products • Ready to buy at particular price at particular time • Willing to pay the price

Conditions for Demand to Exist • Desire for a good or service • Buying power to pay for a good or service • Willingness to give up some buying power

Law of Demand • Quantity of a good or service that consumers will buy varies inversely with the price of the good or service • Buy more at lower prices • Buy less at higher prices

Supply Explained • Quantity of a good or service that producers are able and willing to offer for sale Ø At a specified price Ø In a given period of time

Law of Supply High Price High Supply • Quantity of a good or service that will be offered for sale varies in direct relation to its selling price • Higher price means Ø Greater quantity supplied Ø More profit

The Law of Supply and Demand • The supply of a good or service will increase when the demand is great and decrease when demand is low. • When demand is great: Ø Prices usually increase Ø Supply increases

The Law of Supply and Demand • When demand is low: Ø Prices usually decrease Ø Supply decreases

Two Markets • Buyer’s market $45, 999 Ø Large supply Ø Small demand Ø Lower prices $41, 789

Two Markets • Seller’s market Ø Small supply Ø Large demand Ø Higher prices

Two Types of Demand • Elastic demand: Demand changes when prices change. • Inelastic demand: Demand is constant, even if prices change.

Explain factors that affect supply and demand.

Factors Affecting Demand • Utility • Buying power • Price of other goods and services • Consumers

Factors Affecting Supply • Cost of production • Number of products • Future prices • Disasters and emergencies • Government • Technology

• Consider the necessities you buy regularly. • Consider the other products you want to buy. • What is the difference between the two?

• Weather service predicting a blizzard • Big demand for limited supplies • Price hike at grocery store • Is this ethical?

Acknowledgments Original Developers: Christopher C. Burke, Kerry Winfrey, MBAResearch Version 2. 0 Copyright © 2014 MBA Research and Curriculum Center

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