Relationship Between Demand, Supply and

Price.
Demand the quantity of
a good or service that
consumers are willing and
able to buy at a particular
price.


Law of Demand as prices
decrease, consumers buy more,
as they increase consumers buy less.
There are several conditions that create a
demand for a good or service:

1. Consumer must be interested or aware of it.

1. Enough of it must be available.

1. The price must be reasonable and
competitive.

1. It must be accessible to the consumer.
Factors that increase or decrease demand:

1. Changing Consumer Income usually an
increase in income means people buy
more.





2. Changing Consumer Tastes people
demand what is in fashion.
3. Changing Future Expectations if prices
are expected to increase consumers may
purchase more now.




4. Changes in Population more people
equals more demand and as a segment of
the population increases certain things
increase in demand. (Seniors)

Supply the quantity of a good or service that
businesses are willing to provide at a particular
price.

Law of Supply as prices decrease, producers
supply less and as prices increase producers
supply more.
There are several conditions that affect the
supply of a good or service:

1. The cost of producing it.
2. The price consumers will pay.
Factors that increase or decrease supply:

1. Change in the Number of Producers
more producers increase supply.

1. Changes in Prices a price decrease will
cause a reduction in supply.

1. Changes in Technology reduces the cost
of production and increases supply.
4. Changing Future Expectations producers
have to predict demand and adjust supply
to it.



5. Changing Production Costs lower cost
resources means you can supply more
goods for the same cost.


DEMAND AND SUPPLY GRAPHS
Consumers buy more as prices decrease this
can be shown with a demand curve.
Suppliers provide more as prices increase -
this can be shown with a supply curve.
The point at which the supply and demand
curves meet is the equilibrium price.
Complete
supply and
demand
worksheet.
Supply and Demand Worksheet NAME: ______________________



1. Create a demand graph using the following table of values:

PRICE QUANTITY
10 500
20 450
30 400
40 350
50 300
60 250
70 200






2. Create a supply graph using the following table of values:


PRICE QUANTITY
10 200
20 250
30 300
40 350
50 400
60 450
70 500





3. Using the graphs above, what would be the quantity demanded at a price of
$80? _________

b) What would be the quantity supplied at $80? ________
Demand
Price
Quantity
25
15
Demand
u At the price of $25,
the quantity
demanded = 15.
Change in Quantity Demanded
u A change in the
quantity demanded
is a movement
along the demand
curve. Caused by a
price change.
Price
25
15
Demand
Quantity
10
30
u When price falls to
$10, the quantity
demanded
increases to 30.
Price
Demand
Quantity
Increase in Demand
u An increase in
demand is a
rightward shift in
the entire curve.
25
15 25
New Demand
u More is demanded
at every price.
u At the price of $25,
the quantity
demanded = 25
after the increase.
u Caused by
something other
than a price change
Price
Demand
Quantity
Decrease in Demand
u A decrease in
demand is a
leftward shift in
the entire curve.
u Less is
demanded at
every price
15
25
10
New Demand
u At the price of
$25, the quantity
demanded = 10
after the
decrease.
Price
Quantity
Supply
25
31
Supply
u At the price of
$25, the quantity
supplied = 31.
Price
Quantity
Supply
Change in the Quantity Supplied
u A change in the
quantity supplied
is a movement
along the supply
curve.
25 25
31 16
10
u At the price of
$10, the quantity
supplied = 16.
Price
Quantity
Supply
Increase in Supply
u An increase in
supply is a
rightward shift in
the entire curve.
u More is supplied
at every price.
25 25
31 36
New Supply
u At the price of
$25, the quantity
supplied = 36
after the increase.
Decrease in Supply
u A decrease in
supply is a leftward
shift in the entire
curve.
u Less is supplied at
every price.
u At the price of $25,
the quantity
supplied = 21 after
the decrease.
Price
25
Quantity
Supply
21
New Supply
31
Inelastic Demand

Quantity demanded does not respond
strongly to price changes.

Necessities tend to be income inelastic.

Examples include food, fuel, clothing,
utilities, and medical services.
Elastic Demand

Quantity demanded responds strongly to
changes in price.
Luxuries tend to be income elastic.

Examples include sports cars, furs, and
expensive foods.
Inelastic Supply

Quantity supplied does not respond
strongly to price changes.

Examples include gold and tomatoes.
Elastic Supply

Quantity supplied responds strongly to
changes in price.
Examples include chicken and ice-cream.
How can consumers respond to price
increases for goods and services?
Purchase less.
Use a cheaper substitute.
Delay the purchase.
Do not purchase.
Competition when two or more businesses
try to sell the same type of product or service
to the same customer.
Direct Competition is between similar
products.
Indirect Competition is between goods or
services that are not directly related to each
other.
What happens when competition enters the
marketplace?
Gives consumers more choice.
May reduce prices.
Forces businesses to be more efficient.
Improves customer service.
May force businesses out of the
marketplace.