MID Year Graphs You should know and be able to draw, explain and label all parts.

MID Year Graphs

You should know and be able to draw, explain and label all parts.

Basic S&D ideas

Price

Quantity

Demand

Basic S&D ideas

Price

Quantity

Elastic Demand is more flat andGreater than 1

Basic S&D ideas

Price

Quantity

Inelastic Demand is a steepLine = less than 1

Basic S&D ideas

Price

Quantity

Perfectly Inelastic Demand

Basic S&D ideas

Price

Quantity

Perfectly elastic Demand

Basic S&D ideas

Price

Quantity

Demand

A

B Change in demand

Basic S&D ideas

Price

Quantity

Supply

Basic S&D ideas

Price

Quantity

Inelastic Supply is steep

Basic S&D ideas

Price

Quantity

Elastic Supply is flatter

Basic S&D ideas

Price

Quantity

Perfectly inelastic Supply

Basic S&D ideas

Price

Quantity

Perfectly elastic Supply

Basic S&D ideas

Price

Quantity

Supply

A

B

Change in supply

Basic S&D ideas

Price

Quantity

D

S

Equilibrium – market clearing point

Basic S&D ideas

Price

Quantity

D

S

Equilibrium – market clearing point

Price Ceiling

Basic S&D ideas

Price

Quantity

D

S

Equilibrium – market clearing point

Price Floor

Basic S&D ideas

Price

Quantity

D

S

E

D2

Shift in demand - determinants

Basic S&D ideas

Price

Quantity

D

S

E

S2

Shift in supply - determinants

Basic S&D ideas

Price

Quantity

D

S

E

S2

Double Shift:Shift in supply and demandIncrease in income and lowering of costs of production

D2

Surplus – Consumer and Supplier

Price

Quantity

D

S

Equilibrium – market clearing point

CS

PS

CS = above equilibrium price below the demand curvePS = below the equilibrium price and above the supply curve

TS = CS+PS

Changing CS and PS

Price

Quantity

S

D

Changing CS and PS

Price

Quantity

S

D

A recession cuts income

D2

E2

A

B C

D

Externality – Negative (-)

Price

Quantity

D – Private Value

S – Private Cost

E

S2

O

•O – social cost of pollution•3rd parties wishes

Social Cost

Positive externality (+)

Price

Quantity

S – Private Cost

DD2- Social Value

O = benefit to society

O= positive of education3rd parties benefits

Private Values