Yonkers Public Schools
Name: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: What do you think is the definition of supply and demand? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 1Understanding DemandA ________________________________________ shows how prices ________________________________ the amount people want to buy.The Law of DemandThe law of demand states that ________________________________ buy more of a good when its price ___________________________________.Conversely, consumers buy ____________________ of a good when its price ________________________________.Consumers love ____________________________________.The law of demand is the ____________________________ principle that consumers buy ___________________ of a good when its price ________________________________ and ______________ of a good when its price _____________________________________.The Substitution EffectOne reason that the law of demand exists is the _______________________________________________.The substitution effect __________________________when a consumer ________________________ to an increase in a good’s price by _________________________ less of that good and more of a ________________________ yet cheaper good.When the __________________________ of orange juice rises, consumers __________________________________ cheaper apple juice for orange juice.The Income EffectThe ____________________________________________________ is the change in consumption _____________________________ from a change in income.In other words, when prices ________________________, your money buys ___________________.Higher prices _________________________ your ___________________________________ power.Lower prices __________________________ consumers to _______________________________ demand.__________________________ prices increase consumers’ purchasing ___________________________.Demand ScheduleA ____________________________________________________ records the quantity demanded at various prices.A demand schedule can easily be ______________________________ to a demand curve. ________________________________ love graphs because graphs provide easy __________________________________ of economic concepts.Classwork: Answer the following questions in COMPLETE sentencesState the law of demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide an example of time your purchased a product based on the law of demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide an example of the substitution effect. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________How does the income effect lead to the law of demand? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What is a demand schedule? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What is a demand curve? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why do economists love graphs? _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ What is the law of demand?consumers buy more of a good when its price decreases and less when its price increasethe desire to own something and the ability to pay for ita table that lists the quantity of a good a person will buy at each different pricea table that lists the quantity of a good all consumers in a market will buy at each different price___________ The law of demand results from which two patterns of behavior?demand graph and demand curvesubstitution effect and income effectdemand schedule and income scheduleall of the above___________ What does a market demand curve predict?what the future price of a good will behow much sellers can lower their prices and still earn a profithow much of a good people will buy when the price of a good rises or fallswhat sellers will do to increase demand for a goodName: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: Provide an example of something you purchased at a demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 2Shifts of the Demand CurveWhile the price of a good _____________________________________ a consumer’s decision to purchase, it is not the only ___________________________.Ceteris Paribus__________________________________________ is a Latin phrase meaning that all other things are held ___________________________.A demand curve ____________________________ Ceteris Paribus or that only price is ______________________________ while all other things are held constant.In other words, a demand curve only looks at ______________________. It does not _____________________________ other factors that _________________________________ demand.As any parent will tell you, ___________________________________ cereal is only bought for the toy inside.Shifts in the Demand CurveWhen a ___________________________________________________ shifts, it moves._________________________ can never shift a demand curve because price is in the ______________________________________________.To _____________________________ a demand curve, it must be some factor _____________________ than price.Certainly, an ______________________________ of Mad Cow’s Disease would ____________________________ demand for beef at ______________________ price level.A ___________________________ in price cannot shift a demand curve because the ________________________ of changes in price are already _______________________ into the demand curve.However, ___________________________ other than price can shift the demand curve._____________________________________ tastes, advertising, the price of __________________________________, the price of complements, and consumer _______________________________ about future prices can shift the demand curve.Factors that Can Shift a Demand CurveThe following are _____________________________ that can shift a demand curve:__________________________________Population________________________________________________________Consumer _________________________________________ about Future PricesThe Price of ____________________________________The Price of ____________________________________The Baby Boom generation ______________________________ demand for goods at all price levels._____________________________________ can increase demand at all price plements are goods __________________________________ together. If the _______________________ of the Game Cube rises, people will buy ______________________ games.If we think the price of a ____________________________ good will drop, we will buy ___________________ at all price levels today and wait for the ___________________________ lower price.Classwork: Answer the following questions in COMPLETE sentences.State the Law of Demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What is the relationship between the law of demand and Ceteris Paribus? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why can price not shift a demand curve? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What factors can shift a demand curve? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide an example of a complement. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What happens when a demand curve shifts left? Right? _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Which of the following would NOT cause the demand curve for Latina magazine to shift?The Hispanic American population grows at four times the national average.The articles are now written in both English and Spanish.Hispanic American women become more willing than other ethnic groups to buy magazines.The price of the magazine has been reduced and is now less expensive than other magazines marketed to women.___________ Which of the following goods are complements?milk and creamcontact lenses and glassescanoe and paddlescoffee and tea___________ The shift to the right in a demand curve means a(n)Decrease in demand.Increase in demand.Decrease in income.Increase in substitution.___________ Substitutes areGoods that consumers demand less of when their incomes increase.Goods that consumers demand no matter what the cost.Two goods that are bought and used together.Goods used in place of one another.Name: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: Provide an example of something you purchased at a demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 3Gas prices keep ____________________________ but we ___________________ buying!Doesn’t the law of demand state that ___________________________________ buy less at higher prices?So, why are we still buying gas?Elasticity of Demand___________________________________ of demand is a measure of how consumers ______________________ to a change in price._______________________________ demand is demand that is not very ______________________________ to a change in price.Elastic demand is demand that is very sensitive to a _______________________________ in price.Think _______________________. These pants have ____________________________ waistbands. The waistbands do not _____________________________ if people gain weight.Our __________________________ for gasoline is ______________________________.It does not __________________________ even with a price increase.Think pants again! Sweat pants have elastic waistbands. The pants ___________________________ depending on the size of the person.Our _________________________ for apple juice is elastic. If the price ___________________________, we will buy less. Our demand changes.So, why is our _____________________________ for apple juice elastic and our demand for gasoline inelastic?Factors Affecting Elasticity of DemandThe following are _______________________ that can affect the elasticity of demand:_________________________________ of SubstitutesRelative ________________________________________________________________ Versus LuxuriesTime (It takes time to find substitutes.)It’s obvious, isn’t it? We can ______________________________ orange juice for apple juice.Therefore, we deal with a price ______________________________ by substituting one product for another product.However, we cannot ________________________________ milk for gasoline.Wrapping it up!Elasticity of Demand_______________________________ of demand is a measure of how ____________________________ react to a change in price. If demand is ____________________________, it is not very sensitive to a _________________________ in price.With inelastic demand, ___________________________________ keep buying despite the price increase. If demand is ___________________________, consumers will stop buying a good or ________________________ and look for substitutes.Classwork: Answer the following in COMPLETE sentences.State the Law of Demand. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why is the law of demand not always true? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Define elasticity. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide one example of a good with inelastic demand and explain why demand for that good is inelastic. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide one example of a good with elastic demand and explain why demand for that good is elastic. _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The term “inelastic”Describes demand that is not very sensitive to a change in price.Describes demand that is very sensitive to a change in price.Describes demand whose elasticity is exactly equal to 1.Refers to how consumers make substitutions.___________ What is elasticity of demand?Demand that is not very sensitive to a change in priceDemand that is very sensitive to a change in priceDemand whose elasticity is exactly equal to 1A measure of how consumers react to a change in price.___________ Which of the following is NOT a factor in determining the elasticity of demand for a good?The consumer’s perception of the good as necessity or luxuryThe importance of the good to the consumerAn increase in populationHow many substitute goods are available___________ Why do consumers sometimes take a while to respond to price changes?Price changes do not affect consumers.They need time to decide whether the good is a luxury or a necessity.They cannot find acceptable substitutes immediately.Demand sometimes becomes less elastic over time.___________ The total amount of money a firm receives by selling goods or services isTotal profit.Total revenue.Total cost.Ceteris paribusName: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: What are some of the factors the affect the elasticity of demand?__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 4Law of SupplyThe Law of Supply is the tendency of __________________________________ to offer more of a good at _________________________ prices.Sellers ______________ high prices.The Law of Supply is the ____________________________ of the Law of Demand.Why is the Law of Supply True?Supply ______________________________ as price rises because either existing firms will __________________________ more to make greater profits…Or new firms will __________________________ the market to take _____________________________ of the high prices.__________________ love to make ____________________________.It’s hard to _________________ vinyl records anymore.Suppliers _____________________ selling Compact Discs._____________________________ go where the higher _____________________ are.Suppliers don’t sell Disco anymore.There just _____________________ any ____________________________ in it.A Supply CurveA supply curve is a ___________________________ representation showing the _______________________________ of suppliers to supply more at _____________________________ prices.A supply curve will __________________________________ rise left to ____________________.Suppliers supply ____________________ at higher prices.]Supply _______________________ in the ____________________________________ of price.Elasticity of SupplyLike Demand, Supply can be _____________________________ or ____________________________.In general, supply tends to be ________________________________ inelastic because it takes __________________ to increase supply.However, some _______________________ are more elastic than ____________________.Apples tend ______________________________ inelastic supply.It takes ___________________ to grow apples.The supply of haircuts can be _________________________________ more easily.Classwork: Answer the following questions in COMPLETE sentences.Define the Law of Supply. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________How does the Law of Supply differ from the Law of Demand? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________List two goods with inelastic supply. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________List two goods with elastic supply. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does supply increase as price increase? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does it take time to increase supply? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Name: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: What is the Law of Supply?__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 5A Fixed CostA _________________________________________ is a cost that does ___________ change much no matter how much is _________________________________.An example of a fixed cost is ______________________._____________________________ of how many goods a producer ___________________, the rent must be paid each month. The rent does not _________________________ based on the producer’s _____________________.Example: Regardless of the _____________________________ of pizzas sold, the rent must be _______________.A Variable CostA ______________________________________________ is a cost that rises or falls _________________ on production.An example of a variable cost is the cost of _________________________________________.The ____________________ pizzas sold, the more money _______________________ on cheese. How much ____________________________ a producer spends on cheese _____________________________ on how many pizzas the producer sells.Total Cost___________________________ costs + _________________________________ costs = _______________________ costs.A producer’s total costs _________________________ his fixed costs and his variable costs.Therefore, total costs _______________________________ every month because ________________________________ costs change each month.The Marginal Product of LaborBusinesses can __________________________________ output by hiring more ____________________________.The change in _____________________________ resulting from adding one more worker is the __________________________________ product of labor.Thinking at the margins is ______________________________ whether to add or subtract one additional unit.Hiring a worker may increase _____________________________.Increasing Marginal ReturnsIncreasing marginal ___________________________ occurs when hiring one additional worker ____________________________ production.Ideally, hiring one additional worker will lead to greater _________________________________ and _______________________________.Producers want to_________________________________ production.Diminishing Marginal Returns_________________________________ marginal returns occurs when hiring one additional worker _______________________________________ production.Think about it. If you hire too many ______________________________, there will not be enough machines or ________________________________ to keep everyone busy. Some workers will have ______________________________________ to do or get in the way of other workers.Too ________________________ workers only get in each other’s way.Classwork: Answer the following questions in COMPLETE sentences.What are a producer’s total costs? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________How do fixed costs differ from variable costs? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Define marginal product of labor. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Define increasing marginal returns. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why do producers try to avoid diminishing marginal returns? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________What is thinking at the margins? _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A cost that rises or falls depending on how much is produced is a(n)Fixed cost.Variable cost.Operating cost.Labor cost_____________ A cost that does not change, no matter how much of a good is produced is a(n)Fixed cost.Variable cost.Operating cost.Marginal cost._____________ What is the tendency of suppliers to offer more of a good at a higher price?quantity suppliedsupplylaw of supplyElasticity of supply_____________ What factor might lead to the opening of several new pizzerias in a town?The price of a slice of pizza has gone up.The price of a slice of pizza has gone down.The supply of pizza is inelastic.The cost of producing pizza has doubled.Name: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: What is a fixed cost?__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 6The cost of cheese ________________________ the supply of pizzas. Change in the Cost of InputsAny change in the cost of an ________________________ will affect supply. An example of an input is a __________________________________________________.A ______________________ in the cost of an input will affect _________________________ at all price levels because the good has become more _____________________________ to produce.Conversely, a _____________ in the cost of an input will cause an _____________________________ in supply at all price ernment ______________________________ can also affect supply.A SubsidyA _______________________________ is a government payment that _____________________________ a business or a market.Subsidies _________________________ supply because subsidies increase supplier’s _____________________.Typically, the government ________________________________ subsidies to farmers. A farmer ____________________________ from the subsidy as well as the ___________________.Farmers ___________________________ government subsidies because farm _____________________________ are cheap. Farmers would go out of ___________________________ without subsidies.Excise TaxAn _____________________________ tax is a government tax on the ______________________________ or sale of a good.The government places excise taxes on ________________________ or dangerous products.The excise tax on cigarettes _________________________ supply.The government places an excise tax on cigarettes to _____________________________ consumption of this harmful product.RegulationRegulation is a government ____________________________ in the market that ______________________ the price, quantity, and quality of a good.An example of regulation is _________________________________ car manufacturers to install pollution __________________________ devices on cars.Regulation can __________________________ ernment regulations require car _______________________________________ to install pollution reducing devices. Shifts in Supply CurvesIf the supply curve shifts __________________, fewer goods will be __________________________ at all price levels.If a supply curve shifts ________________________, more goods will be __________________________ at all price levels._______________________ taxes shift a supply curve to the left while __________________________ shift a supply curve to the right.Excise taxes _____________________ supply.When a supply curve shifts to the left, supply is _________________________ at all price levels.When the supply curve _________________________ to the right, supply is increased at all price levels.Classwork: Answer the following questions in COMPLETE sentences.Why does the government place excise taxes on products and how do excise taxes affect supply? ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does the government provide subsidies to some industries and how do subsidies affect supply? ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________How does regulation affect supply? ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does a rise in the cost of an input affect supply? ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ If the total cost of producing 300 leather jackets is $400 and the total cost of producing 301 leather jackets is $435, what is the marginal cost of production at 300 leather jackets? $835$435$400$35____________ A government payment that supports a business or market isQuantity supplied.A regulation.An excise tax.A subsidy. ____________ A tax on the production or sale of a good is calledIncome tax.A revenue tax.An excise tax.A subsidy.____________ What happens to supply when input costs go up?It decreases because the good becomes more expensive to produce.It increases because the good becomes cheaper to produce.It increases because the good becomes more expensive to produce.It decreases because consumers find a substitute product.____________ Government intervention in a market that affects the production of a good isRegulation.An excise tax.Quantity supplied.An input cost.____________ Which of the following will always cause a supply curve to shift to the left?advances in technologyfuture expectations of falling pricesexcise taxesfewer inputsName: ________________________________________________Date: _______________ Saunders/Mrs. McNerneyEco and Gov/________Do Now: What do you think is the definition of supply and demand? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Supply and Demand: Notes 7EquilibriumWhen ________________________ a demand curve and a supply curve, there is a point where the curves ________________________. This point is the __________________________ point.Equilibrium ______________________ when the quantity demanded __________________ the quantity supplied.A market is ______________________ at equilibrium.If a seller has ____________________ donuts on the shelf at $1 per donut, and __________________________ only want seven donuts at that price, then the market is at ____________________________.DisequilibriumA market is at ____________________________ when the quantity demanded does not equal the __________________ supplied.If quantity demanded is ___________________________ than quantity supplied, _____________________ demand occurs.If quantity ________________________ is greater than quantity demanded, ______________________ supply occurs.Low prices _______________________ consumers. Low prices can _____________________ excess demand.The day after Valentine’s Day, ______________________________ will not pay ____________ prices for Valentine’s candy.Excess Demand_____________________ demand occurs when the actual price is ___________________ than the equilibrium price.Low _____________________ encourage demand.To fix this problem, prices must be _____________________.If every parent wants to _________________________ this toy for the holidays, excess demand can ___________________.However, if no one is ______________________, then excess supply occurs.Price CeilingA price ceiling is the _____________________________ price that can be legally _______________________ for a good or service.The government ________________________ with market equilibrium when it creates a price ceiling._____________________________________ is an example of a price ceiling.Price FloorA price floor is the ___________________________ price that can be legally _____________________ for a good or service.The government ___________________________ with market equilibrium when it ____________________ a price floor.____________________________________________ is an example of a price floor.Classwork: Answer the following questions in COMPLETE sentences.When does equilibrium occur in a market? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does excess demand create disequilibrium in the market? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Define excess supply. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Why does the government place a price ceiling on rent? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________How does rent control help some but hurt others? __________________________________________________________________________________________________________________________________________________________________________________________________________________________________Provide an example of a price floor. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________ ................
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