Supply and Demand Change in Supply ■ The cost of raw materials falls At P,, produce Q2 At P2, produce Q1 Supply curve shifts right to s ● More produced at any price on S than on S Q Q Chapter 2: The Basics of Supply and Demand Slide 11
Chapter 2: The Basics of Supply and Demand Slide 11 Supply and Demand ◼ The cost of raw materials falls ⚫ At P1 , produce Q2 ⚫ At P2 , produce Q1 ⚫ Supply curve shifts right to S’ ⚫ More produced at any price on S’ than on S P S Change in Supply Q P1 P2 Q0 Q1 S’ Q2
Supply and Demand a Supply -A Review o Supply is determined by non-price supply determining variables as such as the cost of labor, capital, and raw materials o Changes in supply are shown by shifting the entire supply curve Chapter 2: The Basics of Supply and Demand Slide 12
Chapter 2: The Basics of Supply and Demand Slide 12 Supply and Demand ◼ Supply - A Review ⚫ Supply is determined by non-price supplydetermining variables as such as the cost of labor, capital, and raw materials. ⚫ Changes in supply are shown by shifting the entire supply curve
Supply and Demand a Supply -A Review o Changes in quantity supplied are shown by movements along the supply curve and are caused by a change in the price of the product Chapter 2: The Basics of Supply and Demand Slide 13
Chapter 2: The Basics of Supply and Demand Slide 13 Supply and Demand ◼ Supply - A Review ⚫ Changes in quantity supplied are shown by movements along the supply curve and are caused by a change in the price of the product
Supply and Demand ■ The demand curve o The demand curve shows how much of a good consumers are willing to buy as the price per unit changes holding non-price factors constant o This price-quantity relationship can be shown by the equation OD=OD(P Chapter 2: The Basics of Supply and Demand Slide 14
Chapter 2: The Basics of Supply and Demand Slide 14 Supply and Demand ◼ The Demand Curve ⚫ The demand curve shows how much of a good consumers are willing to buy as the price per unit changes holding non-price factors constant. ⚫ This price-quantity relationship can be shown by the equation: QD = QD(P)
Supply and Demand Price (S per unit Vertical axis measures price(P) paid per unit in dollars Horizontal axis measures quantity(Q)demanded in number of unIts per time period Quantity Chapter 2: The Basics of Supply and Demand Slide 15
Chapter 2: The Basics of Supply and Demand Slide 15 Supply and Demand Quantity Horizontal axis measures quantity (Q) demanded in number of units per time period Vertical axis measures price (P) paid per unit in dollars Price ($ per unit)