Unit one demand and supply.

Demand and Supply 
(DEMAND 1/12/15)

Demand: is the quantities that people are willing and able to buy at various prices.

-The image to the left is a simple demand curve, always downwards sloping.

The law of demand: There us an inverse relationship between price and quantity demanded.
-The image below explains the law very well.

What causes a change in "quantity demanded"?  The answer is the △ in price. (△=change)

There are five determinants. 
1. △ in buyers taste. (advertising)
2. △ in number of buyers. (population)
3. △ in income.
     a) Normal goods - goods that buyers buy more of when their income rises.
     b) Inferior goods - goods that buyers buy less when their income rises.
4. △ in price of related goods.
     a) Substitute goods - goods that serve roughly the same purpose to buyers.
     b) Complementary goods - goods that are often consumed together.
5. △ in expectations. (the future)

(SUPPLY 1/15/15)

Supply: is the quantities that producers/sellers are willing and able to produce/sale at various prices.

-The image to the left is a simple supply curve, it is upwards sloping. 


The law of supply: There is a direct relationship between price and quantity supply. 
-The image below explains the law fairly well.

What causes a change in "quantity supply"? The answer is the △ in price. (△=change)

There are six determinants for the change in quantity supplied: 
1. △ in weather.
2. △ in technology.
3. △ in cost of production.
4. △ in taxes or subsidies.
5. △ in number of sellers.
6. △ in expectations.