© 2007 Thomson South-Western Demand Schedule –The demand schedule is a table that shows the relationship between the price of the good and the quantity.

© 2007 Thomson South-Western

• Demand Schedule – The demand schedule is a table that

shows the relationship between the price of the good and the quantity demanded.

Price Quantity

10

9

8

7

6

1

2

3

4

5


Figure 1 Catherine’s Demand Schedule and Demand Curve

Price ofIce-Cream Cone

0

2.50

2.00

1.50

1.00

0.50

1 2 3 4 5 6 7 8 9 10 11 Quantity ofIce-Cream Cones

$3.00

12

1. A decrease in price ...

2. ... increases quantity of cones demanded.

The demand curve is a graph of the relationship between the price of a good and the quantity

demanded.


Demand

• Demand (D)–the various amounts consumers

are willing and able to purchase at a series of possible prices at a given point in time

• Quantity Demanded (QD)–the amount consumers are willing

and able to purchase at a specific price at a given point in time.


Distinguishing Demand and Quantity Demanded

Demand Quantity DemandedQuantity Demanded

$54321

1020355580

$54321

P QD

1020355580

P QD

EntireEntirerelationshiprelationship

Only aOnly apart ofpart ofthetherelation-relation-ship.ship.


0

D

Price of Ice-Cream Cones

Quantity of Ice-Cream Cones

A tax on sellers of ice-cream cones raises the

price of ice-cream cones and results in a movement along the

demand curve.

A

B

8

1.00

$2.00

4

Changes in Quantity Demanded


d1

d2

DPrice

Quantity

This product more people want to buy but not because the price went down. Look at the price and Quantities

5

6 10

Notice the price stayed the same

Shifts in the curve are caused by any change that alters the quantity demanded at every price.


Price Change Change in Demand

d1

d2

DPrice

Quantity

QD

D1

Price

Quantity

QD

D1

Price

Quantity d2

d1

DPrice

Quantity


DD11 DD22

PP

QDQD11 QDQD22

An increase in tasteincrease in tastefor DVDs results in an

increase in demandincrease in demand.

A decrease in tastedecrease in tastefor videos results in a

decreasedecrease in in demanddemand.

DD33

QDQD33


Shifts in the Demand Curve

• Consumer Income• As income increases the demand for a normal good

will increase.• As income increases the demand for an inferior

good will decrease.


The Impact of a Change in Income

• Higher income decreases the demand for an inferiorinferior good

• Higher income increases the demand for a normalnormal good


can increase/decrease from economic decisions, advertising, andgovernment political decisions (ChinaChina).Ex: The large “baby boom”“baby boom” of 1946-64increased the demand for baby supplies. An increase in life expectancy increased demand for for medical caremedical care, retirementretirementcommunitiescommunities, and nursing homesnursing homes.

Increase in # of consumersIncrease in # of consumers


DD11 DD22

PP

QDQD11 QDQD22

If the iPod-TouchiPod-Touch is expectedexpected to increase in price from $295 to $450.

iPod-TouchiPod-Touch


Shifts in the Demand Curve

• Prices of Related Goods• When a fall in the price of one good reduces the

demand for another good, the two goods are called substitutes.

• When a fall in the price of one good increases the demand for another good, the two goods are called complements.


ComplementComplement[[InverseInverse]]

SubstituteSubstitute[[DirectDirect]]

Gangsta GrillsGangsta Grills Chrysler 300sChrysler 300s ToyotasToyotas

DD11 DD22

PPPP11

QDQD11

P2

DD11

DD22

DD

PP

QDQD22

MV X PQMV X PQ


[DecreaseDecrease in price of one; increaseincrease in the “D” for the other]

Boat PricesBoat Prices

Gasoline DemandGasoline Demand

PP

QDQD

DD11

They are so cheap that They are so cheap that even dogs are buying boatseven dogs are buying boats

P1P2

QD1 QD2

I’m making more money without dropping my prices.

DD22

No changeNo changein pricein price

QDQD


Price Price ofofiPod VideoiPod Video

Demand for Demand for MMicrosoft’sicrosoft’s Z Zuneune

Substitutes – DirectSubstitutes – Direct[IncreaseIncrease in price of one; increaseincrease in “D” of the other]

P

PP22

PP11

QDQD22 QDQD11

QD QD QDQD

DD DD11

DD22

1977, Bill was 1977, Bill was arrested for arrested for

running a stoprunning a stopsign and drivingsign and drivingwithoutwithout a a license.license.


Diminishing Marginal UtilDiminishing Marginal Utilityity• Each additional unit of an item purchased gives less

marginal utility (happy points) than the previous unit. Therefore, the only way I will buy more is if the price is lower.

• Ex. When I’m hungry, I typically will buy 2 breakfast tacos. The reason I don’t buy a third taco is because the marginal utility of the third taco is less than the price of the taco. But, if the price of the taco is less than the marginal utility of the taco, then I will buy the third taco

DDPP11

PP22

QDQD11 QDQD11


..

I ate one hamburger, and it tasted great. The next two tasted okay. I wish I hadn’t have eaten the 5th. I

can’t finish the 6th.

DIMINISHING MARGINAL UTILITYDIMINISHING MARGINAL UTILITYUtility (satisfactionsatisfaction) decreases as more of the same product is consumed.

Disutility [or negative utility]?Disutility [or negative utility]?


11. Elasticity of DElasticity of D – the way price affects QD.12. ElasticElastic - - QDQD that is very responsive to pricevery responsive to price.13. InelasticInelastic - a chgchg in in priceprice has has littlelittle impact on QDimpact on QD.

Elastic (flexible) DemandElastic (flexible) Demand1.1. Substitutes Substitutes (butter)2.2. LuxuryLuxury (mink coat)3.3. ExpensiveExpensive (car)4.4. Has durabilityHas durability (refrigerator)5.5. Lasts a long timeLasts a long time (gas-guzzling car)

Inelastic (inflexible) DemandInelastic (inflexible) Demand1.1. No substitutesNo substitutes (milk)2.2. NecessityNecessity (insulin)3.3. InexpensiveInexpensive (safety pin)4.4. No durabilityNo durability (pencil)5.5. Lasts only a short timeLasts only a short time (bread)


..

ElasticElastic Demand For Cassette Tapes Demand For Cassette Tapes

-$1-$1

DD

“TR” Test$2.50x100,000=$250,000$1.50x600,000=$900,000 +$650,000+$650,000

Think of “responsiveness”“responsiveness” as “flatness”“flatness”.


+25+25% % QDQD

-$1

DD““TR” TestTR” Test

$2 = $30 bil.$1 = $20 bil. -$10 bil.-$10 bil.


““Decrease in D”Decrease in D”

Increase in “QD”Increase in “QD”[caused by a “decrease in price”][caused by a “decrease in price”]

Decrease in “QD”Decrease in “QD”[caused by an “increase in price”][caused by an “increase in price”]

1. Price change1. Price change2. Movement2. Movement3. P3. Pointoint to to ppoinointt[“[“Snap shotSnap shot of of 1 pt1 pt in in timetime]]

Change in “D” [“TIMER”]Change in “D” [“TIMER”]1. Non-price1. Non-price2. Whole curve2. Whole curve3. Shift3. Shift[“Time passes”][“Time passes”]

What could causeWhat could cause an an “increase“increase in in DemandDemand?”?” 5. ExpectationsExpectations of a shortageshortage1. Increase in tastetaste 6. ExpectationsExpectations of a price increaseprice increase2 .Increase in incomeincome [normal goodnormal good] 7. ExpectationsExpectations of positive future incomepositive future income3. Decrease in incomeincome [inferior goodinferior good] 8. IncrIncr in price of a substitutesubstitute for product “X”

4. Increase in market sizemarket size [## of of consumersconsumers] 9. DecrDecr in price of a complementcomplement of product “X”

PP11

PP22

QDQD11

PP11

PP22

QDQD11

DD DD

DD11 DD22 DD11

DD22PP

PP

““Increase in D”Increase in D”

QDQD22 QDQD22


___ ___ 1. A population increasepopulation increase affects sales of Blackberry phones.___ ___ 2. Consumer incomes incomes in the city of Plano decrease, with the result that jewelry jewelry sales are affected.___ ___ 3. A camera store has a sale that features 25% off25% off the price of all camerascameras.___ ___ 4. Texas imposes a 15% luxury tax15% luxury tax on the sale of sailboatssailboats.___ ___ 5. A frost in Florida destroys 60% of the orange crop and increases expectationsexpectations about a future price increaseabout a future price increase of orangesoranges. ___ ___ 6. Consumers expect theexpect the priceprice of iPadsiPads to decreaseto decrease next month. ___ ___ 7. The sale of DVDsDVDs is affected by a 20% increase in the price of DVD players20% increase in the price of DVD players.

___ ___ 8. The sale of bunsbuns is affected by a 20% decrease 20% decrease in the price of in the price of complement -complement - hamburger meathamburger meat.

___ ___ 9. The sale of Kangaroo meatKangaroo meat in Europe [Roo Steak] is affected by a 25% increase in the price of beef, 25% increase in the price of beef, which is a substitute for roo steaksubstitute for roo steak.

___ ___ 10. Dunkin DonutsDonuts lowers the price of donutslowers the price of donuts & experiences a change in sales.

++ DD-- DD

++ QDQD-- QDQD++ DD

-- DD-- DD

++ DD

++ DD

++ QDQD

DVDPlayers

Graph The Black Boldfaced ItemsGraph The Black Boldfaced Items++//-- DD//QDQD

DD DD11PP22

PP11[CCoommpplleemmeennttss - IINNVVEERRSSEE]

[CCoommpplleemmeennttss - IINNVVEERRSSEE]Hamburger

meat

PP11

PP22

DD11D

QDQD1 1 QQD2D2

PP22PP11

DD D1

QDQD22 QD QD11

[SubstitutesSubstitutes - - DIRECTDIRECT]

QDQD22 QD QD11BeefBeef

Kangaroo meatKangaroo meat

DVDsDVDs

BunsBuns


[D – “TIMER;[D – “TIMER; QD – price changeQD – price change [[iinnvveerrssee]]

__1. Which will cause an “Increase in Demand”“Increase in Demand” for the Blackberry CurveBlackberry Curve?

a. increase in income c. increase in the price of the Blackberry Curve b. decrease in income d. decrease in the price of the Blackberry Curve

___2. Which will cause an “Increase in QD”“Increase in QD” for the Blackberry CurveBlackberry Curve? a. decrease in income c. decrease in the price of the Blackberry Curve b. increase in income d. increase in the price of the Blackberry Curve

___3. Which will cause a “Decrease in Demand”“Decrease in Demand” for projectors? a. increase in the price of projectors c. decrease in # of consumers b. decrease in the price of projectors d. increase in projector taste

___4. Which will cause a “Decrease in QD”“Decrease in QD” for projectors? a. increase in the price of projectors c. decrease in # of consumers b. decrease in the price of projectors d. increase in projector taste

AA

CC

CC

AA


1. An increase in the price of Pepsiincrease in the price of Pepsi causes the demand curve for CokeCoke to move to the (right/left). 2. If there is a sale on shirtssale on shirts, the demand curve for tiesties will move to the (right/left). 3. If a man’s workplace is about to close downman’s workplace is about to close down, his demand curve for major purchasesmajor purchases would move to the (right/left).4. If a cure for lung cancercure for lung cancer were found, the demand curve for cigarettescigarettes would move to the (right/left).5. If the price of pancakes decreasesprice of pancakes decreases, the demand for syrupsyrup, a ccoommpplleemmeenntt, will (increase/decrease).6. If the priceprice of of butter decreasesbutter decreases, the demand for margarinemargarine will (incr/decr).

7. A “change in QD”“change in QD” is caused by (price change/TIMER) [a “movement”]8. A “change in D” is caused by (price change/TIMER) [a “shift”]

NS 27-38NS 27-38

e


Definitions

• Supply (S)– the various amounts sellers are willing and

able to produce/sell at a series of possible prices at a given point in time

• Quantity Supplied (QS)– the amount sellers are willing and able to

produce/sell at a specific price at a given point in time.


Generally Speaking…

Price __ Quantity SuppliedPrice __ Quantity Supplied

Price __ Quantity SuppliedPrice __ Quantity Supplied

________ relationship?________ relationship?directdirect


Ben’s Supply Schedule- supply schedule is a table that shows the relationship between the price of the good and the quantity supplied.


Figure 5 Ben’s Supply Schedule and Supply Curve

Price ofIce-Cream

Cone

0

2.50

2.00

1.50

1.00

1 2 3 4 5 6 7 8 9 10 11 Quantity ofIce-Cream Cones

$3.00

12

0.50

1. Anincrease in price ...

2. ... increases quantity of cones supplied.


1 5

Price of Ice-Cream Cone

Quantity of Ice-Cream Cones0

S

1.00A

C$3.00 A rise in the price

of ice cream cones results in a movement along the supply curve.

Change in Quantity Supplied


““Increase in S”Increase in S”

Decrease in “QS”Decrease in “QS”[caused by a “decrease in price”][caused by a “decrease in price”]

Increase in “QS”Increase in “QS”[caused by an “increase in price”][caused by an “increase in price”]

1. Price change1. Price change2. Movement2. Movement3. P3. Pointoint to to ppoinointt[“[“Snap shotSnap shot of of 1 pt1 pt in in timetime]]

Change in “S” [RATNEST]Change in “S” [RATNEST]

1. Non-price1. Non-price2. Whole curve2. Whole curve3. Shift3. Shift[“Time passes”][“Time passes”]

What could cause an “increase in supply?”What could cause an “increase in supply?” 4. IncreaseIncrease in numbernumber of of producersproducers1. DecreaseDecrease in resource costresource cost [wages/raw materials] 5. Producer expectationsProducer expectations of $ decrease decrease2. DecreaseDecrease in the price of an alternative outputalternative output for “X”“X” 6. IncreaseIncrease in subsidiessubsidies3. IncreaseIncrease in technology technology 7. DecreaseDecrease in taxestaxes

PP11

PP22

QSQS11

PP11

PP22

QSQS11

SS SS

SS11 SS22SS11SS22

PPPP

““Decrease in S”Decrease in S”

QSQS22QSQS22


RResource CCost [wages & raw materials] [inverseinverse]

58. Increase in wages (increases/decreases) supply.

Ex: A decrease in the price of computer chips

(increases/decreases) the supply of computers.

S1

P

S2 S3


P1

P1

QS1QS1

BroccoliBroccoli

““Substitutes in production” Substitutes in production” [Remember, productive resources are scarce][Remember, productive resources are scarce]

SCornCorn SS11

PP

SS22

QS1QS1

SS11

PPSS22

S CornCornProducers want to produce more of the good where price is increasing,Producers want to produce more of the good where price is increasing,

or at least, where the price is not going down.or at least, where the price is not going down.

BroccoliBroccoli

P2

QS2QS2

P2

QS2QS2

These are These are “things that “things that can becan be supplied supplied with thewith the same resources”. same resources”.

I only have I only have 200 acres200 acres


This lowers production costs & increases “S”.increases “S”.Ex: Suppose a new milking machine called ““The Invisible Hand”The Invisible Hand” has a very soothing effect on cows; cows find the new machine so “udderly”“udderly” delightful that they produce 30% more milk30% more milk. This technological advance will cause a shift to the rightshift to the right. 54

““Can’t wait till Can’t wait till milking time.”milking time.”


56. If more firms enter an industry, the supply curve will shift to the (left/right).

• When the American Basketball League began play in 1968, there was a (bigger/smaller)

supply of basketball games each week.

60. A new professional football league will (increase/decrease) the supply of football games.

SS33 SS1 1 SS22

PP


59.59. If oil producers expectexpect future oilfuture oil prices toprices to declinedecline, they will (increase/decrease) current production.

SS11

Oil PricesOil Prices

expected expected to decreaseto decrease

[“INVERSE”][“INVERSE”]

PP

SS22

If oil producers expect future oil prices to increaseexpect future oil prices to increase, they will (increase/decrease) current production.

SS22

Oil PricesOil Prices

expected expected to increaseto increase

For example, if the cattle farmercattle farmer expects higher pricesexpects higher prices for beef in the future, he will send (more/less) cattle to market now. He will keep them on the farm now and would send the cattle to the market in the future when prices are expected to be higher.


SS33[Direct][Direct]

PP

Free money from the government (subsidiessubsidies) induces suppliers to supply more.

S1 SS22

If subsidies are taken away, then suppliers are losing money and will decrease supply.


SS33[Inverse][Inverse]

PP

If business have their taxes decreasedtaxes decreased,it moves the supply curve to the right.

SS11 SS22

55. If business have their taxes increasedtaxes increased, it moves the supply curve to the (left/right).

I’m losingI’m losingprofits.”profits.”


4545. ElasticElastic Supply Supply – a small increase/decrease in price causes significant change in QS. Elastic supply is very responsiveto price changes.

Elastic (Flexible) SupplyElastic (Flexible) Supply Inelastic (Inflexible) SupplyInelastic (Inflexible) Supply 1. Can be made quickly 1. Cannot be made quickly2. Little expense (few 2. Great Expense (large capital capital resources required) resources required)3. (47)(47) UnskilledUnskilled workers 3. (48)(48) SkilledSkilled workers4. Long time 4. Short time5. Don’t need scarce 5. Scarcity of natural resources natural resourcesExamples: (50) (50) T-shirtsT-shirts, hats, Examples: Gold, diamonds, shot glasses, and posters and (49) (49) computerscomputers


4646. InelasticInelastic Supply - regardless of price, producers are unwilling/unable to increase/decrease QS. (QS is inflexibleand unresponsive to price changes)

5151. Elastic Elastic supplysupply results in a more horizontalhorizontal line & 5252. inelastic supply results in a more verticalvertical line.

0 0 1000 2000 3000 4000 50001000 2000 3000 4000 5000

Elastic Elastic supplysupply is veryvery responsiveresponsive to price &

inelasticinelastic supply is unresponsiveunresponsive to price.


• 6. Show what happens to the Demand for Apples if they are found to fight cancer.

• 7. Show what happens to the Demand for Gasoline if a Hurricane is heading toward us.

• 8. Show what happens to the Production of a Chemical Plant if the Govt cuts restriction on pollution.

• 9. Show what happens to the Demand for Coach Days tutoring as the Test Approaches.

• 10. Show what happens to the Supply of Labor in a Job that has Great Benefits


• 11.Show what happens to the Demand for Labor If the Govt raises the Minimum Wage.

• 12. Show what happens to the supply of Labor if the Govt raises the Minimum Wage.

• 13. Show what happens to the Demand for Cars if the govt lowers the Legal driving Age.

• 14. Show what happens to the Demand for Beer if the govt raises the legal drinking age.

• 15. Show what happens to the demand of diapers if there is an influx of new immigrants.


• 16. Show what happens to the demand for Flashlights if a hurricane is expected.

• 17. Graph the demand for Coke and Pepsi if coke goes on Sale.

• 18. Graph the supply of Coke and Pepsi if they both raise their prices.

• 19. Graph the Demand for Coke and Pepsi if they both lower their prices.

• 20 What is the Law of demand.


SUPPLY AND DEMAND TOGETHER

• Equilibrium Price– The price that balances quantity supplied and quantity

demanded. – On a graph, it is the price at which the supply and

demand curves intersect.

• Equilibrium Quantity– The quantity supplied and the quantity demanded at

the equilibrium price. – On a graph it is the quantity at which the supply and

demand curves intersect.


At $2.00, the quantity demanded is equal to the quantity supplied!

SUPPLY AND DEMAND TOGETHERDemand Schedule

Supply Schedule


Raising price above Pe

• What is created if price is increased above PE?

P

Q

S

D

PE

QE

P

QD QS

P → ____ QD ____ QS

QS QD ?

Creates a:___________________

How do you eliminate a surplus? _____ P _____ QD ____ QS until _____.

surplus


Equilibrium

• Surplus• When price > equilibrium price, then quantity

supplied > quantity demanded. • There is excess supply or a surplus.

• Suppliers will lower the price to increase sales, thereby moving toward equilibrium.


Figure 9 Markets Not in Equilibrium

Price ofIce-Cream

Cone

0

Supply

Demand

(a) Excess Supply

Quantitydemanded

Quantitysupplied

Surplus

Quantity ofIce-Cream

Cones

4

$2.50

10

2.00

7


Equilibrium

• Shortage• When price < equilibrium price, then quantity

demanded > the quantity supplied. • There is excess demand or a shortage.

• Suppliers will raise the price due to too many buyers chasing too few goods, thereby moving toward equilibrium.


Lowering price below Pe

• What is created if price is dropped below PE?

P

Q

S

D

PE

QE

P

QS QD

P → ____ QD ____ QS

QS QD ?

Creates a:___________________

How do you eliminate a shortage? _____ P _____ QD ____ QS until _____.

This is called the “rationing functionof prices – the price allocates the good.

shortage


• Price floor- price minimum that buyers are required to pay

• Price ceiling- maximum price that sellers are allowed to charge for a service

Which category would a rent-controlled apartment fall into?


Government Intervention

• Producers complain market price is too low.

• _____________establishes a legal minimum price below which the price cannot fall

• Creates:• ____________

_

P

Q

S

D

PE

QE

Examples: Farm price supports; minimum wage

Surplus

Price Floor


Quantity of Labor00

LaborSupply

MMinimuminimumwagewage

LDD LSS

WWEE

LEE

Surplus of Labor Surplus of Labor = Unemployment= Unemployment

WageWageLabor Labor

DemandDemand


Negative impacts of price floors• Reduces the quantity available

• Inefficient allocation of sales among sellers- those willing to sell the good at the lowest price are not able to sell it

• Inefficiently high quality- suppliers spend more on the goods to make them higher quality but consumers aren’t willing to pay for the higher quality of the good


Government Intervention

• Consumers complain market price is too high.

• ______________ establishes a legal maximum price above which the price cannot rise

• Creates:• ______________

P

Q

S

D

PE

QE

Example: rent controls in big cities.

Shortage

Price Ceiling


Figure 9 Markets Not in Equilibrium

Price ofIce-Cream

Cone

0 Quantity ofIce-Cream

Cones

Supply

Demand

(b) Excess Demand

Quantitysupplied

Quantitydemanded

1.50

10

$2.00

74

Shortage


Negative impacts of price ceiling• Wasted resources• Inefficient allocation to consumers- people

who want the good and are willing to pay the higher price don’t get it and those willing to pay a lower price do get it

• Inefficiently low quality- sellers offer lower quality goods at a low price even though buyers would prefer higher quality at a higher price


Quality controls• Limit on a good or quantity that can be

bought or sold (quota)

• License- gives owner a right to supply good/service


COKE RAISES ITS PRICE

EP1

EQ1

P

Q

SURPLUS OF COKE

50 150

IF COKE RAISES ITS PRICE THEY WILL MAKE MORE COKE BUT LESS PEOPLE WILL BE BUYING IT BECAUSE THE PRICE WENT UP

S1

D1

1.00

1.50 How many Buyers? 50

How many made? 150


COKE LOWERS ITS PRICE

EP1

EQ

PS1

D1

1.00

10050 150

Therefore you have a shortage of coke!

.50 150

How many will be made? 50

How many want to buy it?


Gasoline- Hurricane Wipes out some of the Gasoline Refineries

eq

p

q

s

d

1.00

100

Ep


Gasoline- Hurricane Wipes out some of the Gasoline Refineries

eq

p

q

s

d

1.00

100

Ep

ep2

eq2

s2

s


Gas-China has a billion People and they are all starting to get cars

p

q

s

d

1.00

100

Ep

eq


Gas-China has a billion People and they are all starting to get cars

p

q

s

d1

1.00

100

Ep

eq

D

d2


Astros T shirts if they are in the world series

p

q

s

d1

20

100

Ep

eq

d2

D


Gasoline!!!! When a hurricane starts coming towards you!!!!

p

q

s

d1

2.80

100

Ep

eq

10

500

d2

D


If the increase in demand is greater than the increase in supply, the price increasing effect of the increase in demand will override the price decreasing effect of the increase in supply.

P S

D

QQe

Pe

Pe Qe


P S

D

QQe

Pe

Pe Qe

If the increase in supply is greater than the increase in demand, the price decreasing effect of the increase in supply will override the price increasing effect of the increase in demand.


If the increase in supply and the increase in demand are of equal amounts, the price increasing effect of the increase in demand will be offset by the price decreasing effect of the increase in supply -- thus no change will occur in the price.

P S

D

QQe

Pe

Pe Qe


Table 4: What Happens to Price and Quantity When Supply or Demand Shifts?


““IncreaseIncrease in in DD”” ““Decrease in Decrease in DD”” ““Increase in Increase in SS”” ““Decrease in Decrease in SS””

___1. Decrease in incomeincome on market for used carsused cars.___2. Decrease in incomeincome on market for new carsnew cars.___3. Consumer expectationsConsumer expectations about a price decreaseprice decrease.___4. Producer expectationsProducer expectations about a price decreaseprice decrease.___5. Increase in # of producers# of producers on the market for computerscomputers.___6. Increase in # of consumers# of consumers on the market for used carsused cars.___7. Increase in # of consumers# of consumers on the market for new carsnew cars.___8. Decrease in the price of iPodsiPods upon the market for iTiTune songsune songs.___9. Decrease in business taxesbusiness taxes on the market for computerscomputers.___10. Consumer expectationsConsumer expectations of a shortage of applesapples.___11. Decrease in resource costresource cost on market for computerscomputers.___12. Increase in price of wheatwheat upon market for corncorn.___13. Consumer expectationsConsumer expectations of a shortage of cell phones.___14. Producers expectationsProducers expectations about a price increase.___15. Increase in incomeincome on the market for iPod videosiPod videos.

BBBB

CCCCAA

AACCAA

DDCC

AA

AA

AA

AA

DD

D1 D2

(A)(A) (B)(B) (C)(C) (D)(D)

DD11

DD22

SS SS SS11 SS11SS22

SS22DD DD

TIMERTIMER RATNESTRATNEST

PP22 PP11 PP11PP22

PP11 P2P2 PP22PP11

QDQD1 1 QDQD22 QDQD22 QD1QD1 QDQD11 QD2 QD2 QDQD22 QD1 QD1


___1. Increase in incomeincome on the market for camcorderscamcorders. ___2. Increase in # # of of consumersconsumers on market for computers.___3. Producer expectationsProducer expectations about a price increase.___4. Consumer expectationsConsumer expectations about a price increase.___5. Increase in # of producersproducers on market for digital cameras.___6. Increase in resource costresource cost on the market for bagels.

___7. Increase in the price of Apple’s iPhoneApple’s iPhone on the market for Google’s Nexus One phoneGoogle’s Nexus One phone. ___8. Increase in the price of teatea on the market for lemonlemon.___9. Increase in business taxestaxes on the market for SUVsSUVs.___10. Consumers expectConsumers expect a shortage of cell phonescell phones.

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6. A decrease in tastetaste for Fuzzy Wuzzies would: a. increase D, increase P, & increase Q. b. decrease D, increase P, & decrease Q. c. increase S, increase P, & increase Q. d. decrease D, decrease P, & decrease Q.

7. A reduction in the number of firmsnumber of firms producing laptops: a. increase S, increase P, & increase Q. b. increase D, increase P, & increase Q. c. decrease S, increase P, & decrease Q. d. decrease S, decrease P, decrease Q.

8. An increase in the price of pancakes, a complementcomplement for syrup would: a. increase D, increase P, & decrease Q. b. decrease D, decrease P, & increase Q. c. decrease D, decrease P, & decrease Q. d. do none of the above

9. A decrease in incomeincome upon the market for spam would: a. decrease S, increase P, & decrease Q. b. decrease S, increase P, & increase Q. c. increase D, decrease P, & increase Q. d. increase D, increase P, & increase Q.

10. Consumer expectationsConsumer expectations that the price of iPad will increase by 50% in the future will: a. decrease S, decrease P, & decrease Q. b. increase D, increase P, & increase Q. c. decrease D, decrease P, & decrease Q. d. decrease D, decrease P, & increase Q.

Effect of Changes in “D” or “S” on Price and QuantityEffect of Changes in “D” or “S” on Price and Quantity

© 2007 Thomson South-Western Demand Schedule –The demand schedule is a table that shows the relationship between the price of the good and the quantity.

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