Supply
What is the formula to calculate the marginal cost?
change in total cost/change in total product
When a consumer is willing and able to buy a good or service, he creates what?
Demand
When buyers purchase exactly how much as sellers are willing to sell, what is the condition that has been reached?
Equilibrium
Demand is elastic when...? What is an example of an elastic good?
a change in price, either up or down, leads to a relatively larger change in the quantity demanded.
(ex) gold, real estate, luxury items
Thanks to new technology, astronomers predict that northern lights will appear more frequently this winter.
Consider the market for hotel rooms in Iceland, a common location for Northern lights. What happens? Draw on graph.
Demand rises, curve shifts right.
What is the basic principle behind the law of supply?
As price increases, quantity supplied increases. As price decreases, quantity supplied decreases.
What is the basic principle behind the law of demand?
As price increases, demand decreases. As price decreases, demand increases.
What are the two ways you can identify equilibrium?
On a table, finding where supply equals demand (same number)
On a graph, finding the intersection where supply and demand intersect
Demand is inelastic when...? What is an example of an inelastic good?
a change in price leads to a relatively smaller change in quantity demanded.
(ex) Gas, medication, toilet paper
Three major skateboard manufacturers announced that they would be closing their factories. Effective immediately.
Consider the market for skateboards. What happens? Draw on graph
Supply curve goes down, shifts left
Calculate the marginal cost moving from column three to column four.
We'll go over it
Define the law of diminishing marginal utility and provide an example of this.
as we buy more of any good, we will receive less satisfaction from each new unit.
(ex) music, the more you listen to a song the less you may enjoy it.
A surplus occurs when? A shortage occurs when?
supply is greater than demand
Demand is greater than supply
What is the equation to find elasticity of demand?
%change in quantity demanded/%change in price
(QD Point A-QD Point B)/QD Point A
_________________________________
(Price @ point A - Price @ point B)/Price @ point A
TikTok influencers rave about wide-leg jeans.
Consider the market for skinny jeans (a now out of style good) What happens? Draw on graph.
Demand goes down, shifts left
Which of the following would cause a decrease shift in the supply of pizza?
An decrease in the cost of pepperoni
An increase in labor productivity in pizza kitchens
The price of dough needed to produce pizza crust rises by 5%
Advertisements for pizza restaurants become more common on TV
3. The price of dough needed to produce pizza crust rises by 5%
Define the substitution effect and provide an example.
If the price goes up for a product, consumers buy less of that product and more of another substitute product.
(ex) price rise in AirPods, more likely to settle for cheap wired headphones.
If demand goes down, what way will it shift? What happens to equilibrium price and quantity?
If supply goes down, what way will it shift? What happens to equilibrium price and quantity?
Demand shifts left, EQ price and quantity go down
Supply shifts left, EQ price will rise, EQ quantity will fall
Inelastic; elastic
The price of sugar- an ingredient in soda- reaches new heights.
Consider the market for soda. What happens? Draw on graph.
increase in input cost, decrease in supply, shifting supply curve left
List four factors of supply and how they can shift a curve.
Input Costs, labor productivity, technology, government, producer expectations, number of producers
Increase in input costs--> decrease in supply.
Increase in labor productivity--> increase in supply
Increase in technology--> increase in supply
Government places taxes--> decrease in supply
If producer expects price to go up--> increase in supply, if producer expects price down--> decrease S
Increase in # of producers or competition--> decrease in supply
List four factors of demand and how they can shift a curve.
Factors: population (or market size), income, substitutes, complements, advertising, trends
Population (market size) goes up, demand goes up
Increase in income, increase in demand
If a good has no substitutes, demand remains high. If substitutes are created, demand goes down.
Increase in demand for complement, increase in demand for actual item
Increase in advertising, increase in demand
Demand rises and falls due to trends
Ms. Supply and Mr. Demand’s wedding is the party of the year. Friends and family are arriving from out of town for the big day. What happens to the demand for hotel rooms? Draw me a graph showing shift.
What happens to EQ price and quantity?
Demand increases, shifts right.
EQ price and quantity both rise.
Calculate the Elasticity of Demand for the following table. Is the good elastic or inelastic? How do you know this?
We'll talk about it
Record harvests of tomatoes result in lower prices for spaghetti sauce. Spaghetti sauce is a compliment to spaghetti noodles.
Consider the market for spaghetti noodles. What happens? Draw on graph.
The demand curve shifts right.