part iv: supply & demandsupply & demand shifts in supply & demandshifts in supply &...
TRANSCRIPT
Part IV:Part IV:•Supply & DemandSupply & Demand•Shifts in Supply & DemandShifts in Supply & Demand•Linked MarketsLinked Markets•Complementary GoodsComplementary Goods•Substitute GoodsSubstitute Goods•Change in Quantity DemandedChange in Quantity Demanded•Change in Quantity SuppliedChange in Quantity Supplied
ECONOMICSECONOMICSWhat does it mean to me?
LAW of SUPPLYLAW of SUPPLY
LAW of DEMANDLAW of DEMAND
The LAW of SUPPLYLAW of SUPPLY states that producers are willing and able to produce more of a good as its price rises.
(Food, (Food, sleep, date, sleep, date, study, etc.)study, etc.)
QUANTITYQUANTITY
PP
RRII
CCEE
S S (supply)(supply)$8
0
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
….or produce less of a good as its
price decreases.
(Food, (Food, sleep, date, sleep, date, study, etc.)study, etc.)
QUANTITYQUANTITY
PP
RRII
CCEE
S (supply)S (supply)$80
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
The Ps and Qs have an inverse relationship.Math: Y = mX + b
Economics: P = mQ + b
The LAW of DEMAND LAW of DEMAND states that consumers are willing and able to consume less of a good as its price rises.
(Food, (Food, sleep, date, sleep, date, study, etc.) study, etc.)
QUANTITYQUANTITY
PP
RRII
CCEE
D (demand)D (demand)
$80
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
…..or consume more of a good as its price
decreases.
(Food, (Food, sleep, date, sleep, date, study, etc.) study, etc.)
QUANTITYQUANTITY
PP
RRII
CCEE
D (demand)D (demand)
$80
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
Math: Y = -mX + b
Economics: P = -mQ + b
The Ps and Qs have an inverse relationship.
Table A-1 Novels Purchased by Emma
Copyright©2003 Southwestern/Thomson Learning
*Mankiw
Figure A-3 Demand Curve
*Mankiw
Figure A-4 Shifting Demand Curves
*Mankiw
Figure A-5 Calculating the Slope of a Line
*Mankiw
Putting these two curves together gives us the point ofPutting these two curves together gives us the point of EQUILIBRIUM…equilibrium gives us the optimum point
of production at the price people are willing to pay.
(Food, (Food, sleep, date, sleep, date, study, etc.) study, etc.)
QUANTITYQUANTITY
PP
RRII
CCEE
S (supply)S (supply)
D (demand)D (demand)
E (equilibrium)E (equilibrium)
$80
$70
$60
$50
$40
$30
$20
$10
0100 200 300 400 500 600
In a market economy, In a market economy, the price of a good the price of a good
signals to consumers signals to consumers the cost of producing a the cost of producing a good. good. MARKET PRICEMARKET PRICE
also signals to also signals to producers the value producers the value
that consumers place that consumers place on a good. Market on a good. Market
price coordinates the price coordinates the actions of actions of consumersconsumers
(demand) and (demand) and producers producers (supply).(supply).
What happens when What happens when changes occur in the changes occur in the
economy?economy?
How do these How do these changes affect changes affect
supply and demand?supply and demand?
The Chicago Cubs have a
winning season. What happens to
the price of World Series
tickets?
Does this affect the supply or demand curve?
Chart I: Demand increase (P ; Q )Chart I: Demand increase (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
S S
DD0 0
E0 P0
Q0
P1
Q1
E1
The Chicago Cubs have a winning season. What happens to the price of World Series tickets?
DD1 1
Price
goes up
Quantity goes up
Gas prices increase
dramatically. What happens to the market
for big automobiles?
Does this affect the supply or demand curve?
Chart II: Demand decrease (P ; Q )Chart II: Demand decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
S S
E0 P0
Q0
P1
Q1
E1
Gas prices increase dramatically. What happens to the market for big automobiles?
DD0 0 DD1 1
Price
goes down
Quantity goes down
Plentiful oil fields are Plentiful oil fields are discovered in Nevada. discovered in Nevada. What happens to the What happens to the
market for oil?market for oil?
Does this affect the supply or demand curve?
Chart III: Supply Increase (P Chart III: Supply Increase (P
; Q ) ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS0 0
D D
E0 P0
Q0
P1
Q1
E1
Plentiful oil fields are discovered in Plentiful oil fields are discovered in Nevada. What happens to the market for oil?Nevada. What happens to the market for oil?
SS11
Price
goes down
Quantity goes up
A drought has depleted A drought has depleted the corn crop. What the corn crop. What
happens to the market happens to the market for corn?for corn?
Does this affect the supply or demand curve?
Chart IV: Supply Decrease (P ; Q )Chart IV: Supply Decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS0 0
D D
E0 P0
Q0
P1
Q1
E1
A drought has depleted the corn crop. What happens A drought has depleted the corn crop. What happens to the market for corn?to the market for corn?
SS11
Price
goes up
Quantity goes down
Let’s look at a shift using numbers:
The government adds a $1 tax to cigarettes.
Does this affect supply or demand?
Chart IV: Supply Decrease (P ; Q )Chart IV: Supply Decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS0 0
D D
E0
$6
$5
$4
$3
$2
$1
0
1K 2K 3K 4K 5K
E1
Congress adds $1 tax to cigarettes.Congress adds $1 tax to cigarettes.
SS11
Price goes up
Quantity goes down
This area represents the $1 tax.
LINKED MARKETS
LINKED MARKETS pertain to those goods which affect other goods.
For instance:For instance:
Coffee =>Coffee =>
Peaches =>Peaches =>
Vegetarianism =>Vegetarianism =>
CreamCream
BlueberriesBlueberries
Leather CoatsLeather Coats
Coffee beans are hit by an unusual frost. What happens to the price and quantity of cream?
Which of the charts (I, II, III, or Which of the charts (I, II, III, or IV) will pertain to these IV) will pertain to these
markets?markets?
Chart IV: Supply Decrease (P ; Q )Chart IV: Supply Decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS00
DD
E0 P0
Q0
P1
Q1
E1
SS11
Chart IV represents the depleted coffee crop.
Price
goes up
Quantity goes down
Chart II: Demand decrease (P ; Q )Chart II: Demand decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
E0 P0
Q0
P1
Q1
E1
DD00DD11
The demand for cream decreases as graphed in Chart II.
Price
goes down
Quantity goes down
So, a decrease in the supply of coffee causes the price of coffee to rise. People who do not want to pay the high price for coffee will have a reduced demand for
cream to go into the coffee.
Coffee and cream are considered complementary goods.complementary goods.
A complementary good is defined as a good who, when its price rises causes a decrease in the demand of another
good (or visa versa).
Complementary goods have an inverse relationship between price of
one good and demand for another.
Pa Db
Pa Db
A virus A virus attacks attacks
broccoli. broccoli. What happens What happens to the price to the price and quantity and quantity of brussels of brussels sprouts?sprouts?Which of the charts (I, Which of the charts (I,
II, III, or IV) will II, III, or IV) will pertain to these pertain to these
markets?markets?
Chart IV: Supply Decrease (P ; Q )Chart IV: Supply Decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS00
DD
E0 P0
Q0
P1
Q1
E1
SS11
Chart IV represents the depleted broccoli crop.
Price
goes up
Quantity goes down
Chart I: Demand increase (P ; Q )Chart I: Demand increase (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
DD00
E0 P0
Q0
P1
Q1
E1
DD11
Chart I represents the increase in demand of brussels sprouts.
Price
goes up
Quantity goes up
So, the virus creates a diminished supply of
broccoli which drives up the price. Consumers who don’t wish to pay the higher price
will look for a substitute good such as brussels
sprouts.
A substitute good is defined as a good who, when its price rises
causes a increase in the demand of another good (or visa versa).
Substitute goods have a direct relationship between price of one
good and demand for another.
Pa Db
Pa Db
A wrinkle-fre
e,
nice cloth is
invented. What
happens to th
e
price and
quantity of
cotton?
Which of the charts (I, II, Which of the charts (I, II, III, or IV) will pertain to III, or IV) will pertain to
these markets?these markets?
Chart I: Demand increase (P ; Q )Chart I: Demand increase (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
DD00
E0 P0
Q0
P1
Q1
E1
DD11
The demand for the new cloth The demand for the new cloth increases as graphed in Chart I.increases as graphed in Chart I.
Price
goes up
Quantity goes up
Chart II: Demand decrease (P ; Q )Chart II: Demand decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
E0 P0
Q0
P1
Q1
E1
DD00DD11
The demand for cotton decreases as graphed in
Chart II.
Price
goes down
Quantity goes down
So…..people So…..people using, or using, or
demanding, less demanding, less cotton will cause cotton will cause
the price to go the price to go down and less of down and less of the fabric to be the fabric to be
made.made.Are these goods
substitute or complementary?
Vegetarianism expands greatly, what happens to the
P & Q of leather coats?
Which of the charts (I, II, III, or IV) will pertain to these
markets?
Chart I: Demand increase (P ; Q )Chart I: Demand increase (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
DD00
E0 P0
Q0
P1
Q1
E1
DD11
Chart I shows what happens to the P & Q of vegetables.
Price
goes up
Quantity goes up
Chart II: Demand decrease (P ; Q )Chart II: Demand decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS
E0 P0
Q0
P1
Q1
E1
DD00DD11
The demand for beef decreases as graphed in Chart II.
Price
goes down
Quantity goes down
Chart IV: Supply Decrease (P ; Q )Chart IV: Supply Decrease (P ; Q )
QUANTITYQUANTITY
PP
RRII
CCEE
SS00
DD
E0 P0
Q0
P1
Q1
E1
SS11
Chart IV shows what happens to the P & Q of leather coats.
Price
goes up
Quantity goes down
So…..the increase in the purchase So…..the increase in the purchase of vegetables will create a lack of of vegetables will create a lack of demand for beef. This will cause demand for beef. This will cause
fewer cows to be slaughtered, fewer cows to be slaughtered, creating less leather to be creating less leather to be
available, or a decrease in supply, available, or a decrease in supply, which will cause the price to go up which will cause the price to go up
on leather coats.on leather coats.
Demand and Supply:
Single Markets where both curves
shift.
Now let’s see what happens when an event occurs and impacts both
the supply and the demand….
What is the short term impact of the government
legalizing marijuana?
Will this affect the supply curve or the demand curve?Or both?
Chart V: (D ; S Chart V: (D ; S
) )
QUANTITYQUANTITY
PP
RRII
CCEE
S S
DD0 0
E0 P0
Q0
What is the short term impact of the government legalizing marijuana?
DD1 1
SS11
E1
Q1
The The demand demand curve curve moves moves right right
indicatinindicating an g an
increase.increase.The The
supply supply curve curve moves moves right right
indicatinindicating an g an
increase.increase.
Chart V: (D ; S Chart V: (D ; S
) )
QUANTITYQUANTITY
PRICEPRICES S
DD0 0
E0 P0
Q0
This chart shows and increase in both supply and demand. As a result:
DD1 1
SS11
E1
Q1
Price will be
indeterminate.
Quantity will increas
e
Frost hits coffee growing areas, while coffee is “cleared”
as a cause of cancer.
Will this affect the supply curve or the demand curve?Or both?
Chart VI: (D Chart VI: (D
; S ); S )
QUANTITYQUANTITY
PP
RRII
CCEE
DD0 0
E0 P0
Q0
Frost hits coffee growing areas, while coffee is “cleared” as a cause of cancer.
DD1 1
The The demand demand curve curve moves moves right right
indicatinindicating an g an
increase.increase.The The
supply supply curve curve moves moves left left
indicatinindicating an g an
decrease.decrease.
P1
SS0 0
SS11 E1
Chart VI: (D Chart VI: (D
; S ); S )
QUANTITYQUANTITY
PP
RRII
CCEE
DD0 0
E0 P0
Q0
In this chart, demand will increase while supply decreases. This will result in:
DD1 1
P1
SS0 0
SS11 E1
Price will
increase.
Quantity will be
indeterminate.
A sturdy, shippable tomato that tastes like cardboard is introduced into the market.
Will this affect the supply curve or the demand curve?Or both?
Chart VII: (D Chart VII: (D
; S ); S )
QUANTITYQUANTITY
PP
RRII
CCEE
E0 P0
Q0
P1 E1
A sturdy, shippable tomato that tastes like cardboard is introduced into the market.
DD0 0 DD1 1
SS0 0 SS11 The The
demand demand curve curve moves moves left left
indicatinindicating an g an
decrease.decrease.The The
supply supply curve curve moves moves right right
indicatinindicating an g an
increase.increase.
Chart VII: (D Chart VII: (D
; S ); S )
QUANTITYQUANTITY
E0 P0
Q0
P1 E1
When demand is decreased and supply is increased, this results in:
DD0 0 DD1 1
SS0 0 SS11
Price will
decrease.
Quantity will be
indeterminate.
PRICE
Newspapers report high
levels of salmonella in
chickens, many must be
destroyed.Will this affect
the supply curve or the demand curve?Or both?
Chart VIII: (D Chart VIII: (D
; S ) ; S )
QUANTITYQUANTITY
PP
RRII
CCEE
E0 P0
Q0
Newspapers report high levels of salmonella in chickens, many must be destroyed.
DD0 0 DD1 1
The The demand demand curve curve moves moves left left
indicatinindicating an g an
decrease.decrease.The The
supply supply curve curve moves moves left left
indicatinindicating an g an
decrease.decrease.
SS0 0
Q1
E1
SS11
Chart VIII: (D Chart VIII: (D
; S ) ; S )
QUANTITYQUANTITY
PRICEPRICE
E0 P0
This chart shows what happens when demand and supply are both decreased.
DD0 0 DD1 1
SS0 0
Q1
E1
SS11
Q0
Price will be
indeterminate.
Quantity will decreas
e
Economics Economics is mostly is mostly
about about changes--changes--
not levels.not levels.
Several years ago, Baby M was born to a surrogate mother who had been paid $10,000 to give birth to
the baby. The birth mother changed her mind and sued in court to have the child returned to her. The judge
agreed.
What impact did this have on the supply of surrogate
mothers?
What impact did this have on the demand for babies
born to surrogate mothers?
Using supply and demand analysis, explain why the price of roses
always seems to rise just before Valentine’s
Day.
Exercise One:
Using supply and demand Using supply and demand analysis, determine how analysis, determine how
a freeze that kills a freeze that kills half the rose crop half the rose crop
would affect the price would affect the price of roses.of roses.
Using supply and demand analysis, determine how a
freeze that kills half the
rose crop would affect the price
of fine chocolates.
Exercise Two:
Some time ago,the city of Ft.Lauderdale
had an initiative on the general
election ballot that asked
voters to raise the minimum wage in that city to
a level 40 percent above the national minimum wage.
This year the This year the initiative would initiative would make the minimum make the minimum wage be $7.35 in wage be $7.35 in Ft. Lauderdale and Ft. Lauderdale and $5.25 elsewhere.$5.25 elsewhere.
•How would things in Ft. How would things in Ft. Lauderdale have changed if Lauderdale have changed if the initiative had passed?the initiative had passed?
•What would be the same?What would be the same?
•What would change?What would change?
•Predict the effect of the
legislation on the
markets for labor in
Ft. Lauderdale and in the suburbs
outside the city.
•Would you Would you rather work rather work
in Ft. in Ft. Lauderdale Lauderdale or outside or outside the citythe city
•Would you be Would you be more likely more likely
to find a job to find a job in Ft. in Ft.
Lauderdale Lauderdale or outside or outside the city?the city?
There is a small There is a small business person business person who is planning to who is planning to re-locate to the re-locate to the Ft. Lauderdale Ft. Lauderdale
area.area.
*Would you advise the business person to set up *Would you advise the business person to set up business in Ft. Lauderdale or in a suburb of Ft. business in Ft. Lauderdale or in a suburb of Ft.
Lauderdale? What is your reasoning?Lauderdale? What is your reasoning?
Exercise Three:Exercise Three:
Suppose you run a lawn mower business. You charge $15 per Suppose you run a lawn mower business. You charge $15 per standard size lawn and can mow five lawns in an eight hour standard size lawn and can mow five lawns in an eight hour
day. You currently have more people asking you to mow day. You currently have more people asking you to mow their lawns than you can satisfy and estimate that you their lawns than you can satisfy and estimate that you
could sign up as many as 25 additional customers. You have could sign up as many as 25 additional customers. You have two strategies that will permit you to expand your two strategies that will permit you to expand your
business.business.
Strategy Two….is to rent a riding lawn mower that will permit you to mow seven lawns per day. Rent for the riding
mower is $100 per week. Gas and oil for the
mower cost $25 per week.
Strategy One…….is to hire your friend Jim to work for you. Jim is a good worker who will work for $8 an hour.
OPTION 0:
Actually, there are 3 options--the first being “status quo.”
($15 per lawn) X (25 lawns per week) ($15 per lawn) X (25 lawns per week) = $375 per week= $375 per week
OPTION 1:
Hire Jim to work by the hour.
It takes him 8 / 5 = 1.6 hours to mow a lawn
Marginal Revenue per lawn = $15
Marginal loss per lawn = ($8 per hour) X (1.6 hours to mow) = $12.80
$15 - 12.80 = $2.20 extra profit per lawn
If Jim mows 25 lawns per week:
25 X $2.20 = $55 profit per week
YOUR NET REVENUE IS:
$375 + 55 = $430
OPTION 2:
Rent Lawn Mower
MARGINAL REVENUE
(7 lawns per day) X (5 days) = 35 lawns per week
35 lawns X $15 per lawn = $525
MARGINAL LOSS = MARGINAL LOSS = $125$125
YOUR NET REVENUE IS:
$525 -125 = $400
•Should you expand your business? Why or why not?
•Which strategy, if
any, should you use? Why?
•If the riding If the riding lawn mower lawn mower
permitted you to permitted you to mow 8 lawns per mow 8 lawns per day, would your day, would your
strategy change? strategy change? Why or why not? Why or why not?
OPTION 4:
Rent Lawn Mower (8 lawns per day)
MARGINAL REVENUE
(8 lawns per day) X (5 days) = 40 lawns per week
40 lawns X $15 per lawn = $600
MARGINAL LOSS = MARGINAL LOSS = $125$125
YOUR NET REVENUE IS:
$600 -125 = $475
CHANGE IN DEMANDCHANGE IN DEMAND
vsvs
CHANGE IN QUANTITY CHANGE IN QUANTITY DEMANDEDDEMANDED
The Basic Determinants of DemandDeterminants of Demand are:
1) consumer tastes and preferences
2) number of consumers in the market
3) consumers’ money incomes
4) prices of related goods
5) consumer expectations about future prices and incomes
1) Change in consumer tastesA favorable change in consumer tastes means that more of it will be demanded and shift the demand
curve rightward. Conversely, an unfavorable change in consumer tastes means that less will be demanded and shift the demand curve left.
Changes may occur because:
*a new product comes to the market
*health concerns
*fads
2) Number of buyersAn increase in the number of consumers in a market means that more “stuff” will be demanded and shift the demand curve rightward. Conversely, a decrease
change in consumers in a market means that less “stuff” will be demanded and shift the demand curve
to the left.
Factors affecting numbers include:
*improvements in communication
*aging baby boomers
*increased life expectancy
3) Consumer IncomeFor most commodities, a rise in income causes an
increase in demand. Conversely, demand will decline as incomes fall.
Commodities whose demand varies directly with money income are called superior, or NORMAL NORMAL
GOODSGOODS..
Similarly, rising incomes may cause demand for hamburger and charcoal grilles to decline as
wealthier consumers switch to T-bones and gas grilles. Goods whose demand varies inversely with
money income are called INFERIOR GOODSINFERIOR GOODS.
4) Prices of related goodsA change in the price of a related good may increase
or decrease the demand depending upon whether the related good is a substitute goodsubstitute good or a
complementary goodcomplementary good.
*When two products are substitutes the price of one and the demand for the other move in the same
direction.
*When two products are complements, the price of one good and the demand for the other good move
in opposite directions.
5) Expectations of the futureConsumer expectations of higher future prices may prompt them to buy now to “beat” the anticipated
price rise, thus increasing today’s demand.
Conversely, expectations of lower prices may delay purchases.
QUANTITYQUANTITY
PRICEPRICES S
E0 P0
Q0
P1
Q1
E1
DD0 0 DD1 1
P2
Q2
DD2 2
A change in the demand schedule or, graphically, a shift in the location of the demand curve is called a CHANGE IN DEMANDCHANGE IN DEMAND. This is caused by a change
in one or more of the determinents of demand.
QUANTITYQUANTITY
PP
RRII
CCEE
D (demand)D (demand)
$80
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
By contrast, a CHANGE IN QUANTITY CHANGE IN QUANTITY DEMANDEDDEMANDED designates the movement of one point to another--from one price quantity to another--on a fixed demand curve, resulting from (I.e.) a change in priceprice.
0
D
Price of Ice-Cream Cones
Quantity of Ice-Cream Cones
A tax that raises the price of ice-cream cones results in a
movement along the demand curve.
A
B
8
1.00
$2.00
4
Changes in Quantity Demanded
CHANGE IN SUPPLYCHANGE IN SUPPLY
vsvs
CHANGE IN QUANTITY CHANGE IN QUANTITY SUPPLIEDSUPPLIED
The Determinants of SupplyDeterminants of Supply are:
1) resource prices
2) technique of production
3) taxes and subsidies
4) prices of other goods
5) price expectations
6) number of sellers in the market.
1) Resource PricesAn increase in the price of resources used in
production will increase production costs and squeeze profits. This reduction in profits reduces
the incentive for firms to supply output at each product price.
2) TechnologyImprovements in technology enable firms to
produce units of output with fewer resources. Since resources are costly, using fewer of them lowers
production costs and increases supply.
3) Taxes and subsidiesAn increase in sales or property taxes will increase
production costs and reduce supply.
4) Prices of Other GoodsFirms that produce one good can sometimes use their plant and equipment to produce alternative goods. Higher prices of these “other goods” can
sometimes entice producers to switch production to them in order to make more profit.
5) Expectation of futureExpectations of future prices can affect the
willingness of a producer to supply that product.
6) Number of sellersThe larger the number of sellers, the larger the
supply. As more firms enter an industry, the curve moves to the right. As firms leave an industry the
curve shifts to the left.
QUANTITYQUANTITY
PP
RRII
CCEE
SS0 0
D D
E0 P0
Q0
P1
Q1
E1
SS11
P2
Q2
E1
SS11
A CHANGE IN SUPPLYCHANGE IN SUPPLY means a change in the entire schedule and a shift of the entire curve,
which is caused by a change in one or more of the determinants of supply.
QUANTITYQUANTITY
PP
RRII
CCEE
S S (supply)(supply)$8
0
$70
$60
$50
$40
$30
$20
$10
0
100 200 300 400 500 600
In contrast, a CHANGE IN QUANTITY CHANGE IN QUANTITY SUPPLIEDSUPPLIED is a movement from one point to
another on a fixed supply curve. The cause of which is a change in price price of a specific product.
1 5
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones0
S
1.00
A
C$3.00 A rise in the price
of ice cream cones results in a movement along the supply curve.
Change in Quantity Supplied
In 1993, Congress was expected to pass more stringent gun control laws. How would consumer expectations affect supply and demand?
If freezing weather were to destroy most of Florida’s citrus crop, how might consumers react? What would be their rationale?
The price of beef rises. How will this affect the price of chicken?
International trade agreements such as NAFTA and GATT have reduced foreign trade barriers on American farm products. How does this affect supply and demand? What determinant shifts the curve?
The local grocer lowers the price of grapes, which increases demand. Is this a change in demand or a change in quantity demanded?
The price of coffee decreases. What happens to the demand for cream? These two products are called _____________.
Farmers anticipate the price of corn will rise in a few months. What is likely to happen affecting supply and demand?
The price of gasoline falls and, as a result, you drive your car more. How will this affect demand for complementary goods? What kinds of goods are affected?
THE END
Compiled by Virginia Meachum, Economics Teacher, Coral Springs High School, Broward County, FL