Supply and Demand

Supply and Demand

Review

Poll

How confident do you feel about the Laws of Supply and Demand?

• Very confident

• Somehow confident

• Not really confident

• Not at all confident

​Macro and microeconomics

​Macroeconomics is the economic field of study which focuses on larger-scale topics such as gross domestic product and national unemployment.

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Microeconomics is the economic field of study which focuses on consumers, businesses and industries.

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Supply and demand are part of Microeconomics.

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Multiple Choice

Which economic field of study focuses on larger-scale topics such as gross domestic product and national unemployment?

• Macroeconomics

• Microeconomics

• Macro and Microeconomics

• Social Studies

Multiple Choice

Supply and demand curves are used in which branch of economics?

• Macroeconomics

• Microeconomics

• Megaeconomics

​Law of Supply

​Law of Supply states that, all other factors being equal, as the product price decreases the quantity of the product provided by sellers also decreases, and as the product price increases the quantity of the product provided by sellers also increases.

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​The supply curve has an upward slope.

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Fill in the Blanks

Multiple Choice

Which direction does the supply curve slope?

• Up

• Down

• No slope

​Supply Curve Shifts

​The following factors shift the supply curve:

• ​Cost of production

• ​Competition

• ​Technology

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​When supply increases the supply curve shifts to the right

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​When supply decreases the supply curve shifts to the left

Multiple Choice

How does the following situation SHIFT the supply curve for a product?

The main manufacturer of the product signs a new labor contract that increases worker salaries and benefits.

• It shifts the curve left

• It shifts the curve right

• It does not shift the curve

​Law of Demand

​Law of Demand states that, all other factors being equal, as the product price decreases the quantity of the product sought by buyers increases, and as the product price increases the quantity of the product sought by buyers decreases.

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​The demand curve has an downward

slope.

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Fill in the Blanks

Multiple Choice

Which direction does the demand curve slope?

• Up

• Down

• No slope

​Demand Curve Shifts

​The following factors shift the demand curve:

• ​Income

• ​Preference

• ​Substitutes

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​When demand increases the demand curve shifts to the right

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​When demand decreases the demand curve shifts to the left

Multiple Choice

Before Thanksgiving, the price of turkeys increases but the demand also increases. Is this a violation of the law of demand?

• No, because the demand in this case is shifted by increased preference due to Thanksgiving, not by the price

• Yes, because the demand should never increase when the price increases

Multiple Choice

How does the following situation SHIFT the demand curve for a cheese cake shop in a small town? A cup cake shop opens down the block.

• Shifts the curve left

• Shifts the curve right

• Does not shift the curve

Multiple Choice

How does the following situation SHIFT the demand curve for herbal tea? There is a widely publicized study explaining the health benefits of herbal tea.

• Shifts the curve left

• Shifts the curve right

• Does not shift the curve

Multiple Choice

How does the following situation SHIFT the demand curve for specific brand of house paint? The manufacturer increases prices to maximize profit.

• Shifts the curve left

• Shifts the curve right

• Does not shift the curve

​Equilibrium, Shortage and Surplus

​Equilibrium is the point at which supply and demand are the same and occurs at the intersection of the supply and demand curves.

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A surplus occurs when there is a high supply of a product and a low demand for it.

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A shortage occurs when there is a low supply of a product and a high demand for it.

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Multiple Choice

Which area indicates a shortage?

• A

• B

• C

• D

Multiple Choice

Which area indicates a surplus?

• A

• B

• C

• D

Multiple Choice

Refer to the diagram. A price of $15 in this market will result in:

• Equilibrium

• Surplus

• Shortage

Multiple Choice

Refer to the graph. The equilibrium price and quantity for this product will be:

• $60 and 1,000

• $60 and 2,600

• $100 and 5,000

Multiple Choice

Preference for the product goes down and causes the demand curve to decrease and shift left. What will be the new equilibrium price and quantity in this case?

• $5 and 1,000

• $10 and 1,500

• $7.5 and 1,250

Multiple Choice

Cost of Production drops and causes the supply to increase and the supply curve to shift right. What will be the new equilibrium price and quantity in this case?

• $6 and 20,000

• $4 and 30,000

• $6 and 40,000