Slide 1:Demand & Supply Shifters


Slide 2:Let's Take A Look At The Five Demand Shifters ["TIMER"]


Slide 3:Concentration on these slides is guaranted to improve your economics grade. Warning


Slide 4:D1 D2 P QD1 QD2 1."Change in Taste" [Direct] An increase in taste for DVDs results in an increase in demand. A decrease in taste for videos results in a decrease in demand. D3 QD3


Slide 5:Increase in demand for dark chocolate after studies revealed that there were health benefits from eating it. Scientists have discovered that smokers who ate dark chocolate had less hardening of the arteries and a lowered risk of blood clots. D1 D2 P Example 2 on "Change in Taste" for Dark Chocolate


Slide 6:D1 D2 P QD1 QD2 2. Change in Income [Normal-Direct; Inferior-Inverse] More income results in more demand for new cars; less demand for used cars. New Cars Used Cars Less income results in more demand for used cars; less demand for new cars.


Slide 7:D1 D2 P QD1 QD2 3. Change in Market Size [Direct] [Number of Consumers] More demand for both normal & inferior goods New Cars Used Cars This is what we told one billion Chinese, as new potential consumers, when we opened trade relations with them in 1972.


Slide 8:D1 D2 P QD1 QD2 4. Expectations [of consumers] [about future price, availibility, & income] If Steve Jobs responds to iRate customers who bought the iPhone at $599 and says, “iSorry, we will raise the price back to $599 in 3 weeks.” iPhone $399 Buy it now to save money.


Slide 9:D1 D2 P QD1 QD2 4. Expectations [of consumers] [about future availibility of toilet tissue] If there is expected to be a major shortage of toilet tissue, then consumers will stock up now or risk not getting any.


Slide 10:D1 D2 P QD1 QD2 4. Expectations [of consumers] [about future income] Let’s say that we are coming out of recession & consumers feel secure about their jobs. [Positive future income]


Slide 11:D1 D2 P QD1 QD2 4. Expectations [of consumers] [about future income] Let’s say that we are going into a recession and consumers don’t feel secure about their jobs. [Negative future income]


Slide 12:Complement [Inverse] Substitute [Direct] Milk Cereal Pop Tarts D1 D2 P P1 QD1 P2 D1 D2 D P 5. Prices of Related Goods [Substitutes-Direct; Complements-Inverse] QD2


Slide 13:Now, Let's Take A Look At The Seven Supply Shifters ["RATNEST"]


Slide 14:1.Resource Cost [wages & raw materials] [Inverse] Wages Raw Materials Intel Pentium Chip S If resource cost decreases supply Increases [making more $] If resource cost increases supply Decreases [making less $] S S P


Slide 15:P1 P1 QS1 Broccoli “Substitutes in production” I only have 200 acres S Corn S1 P S2 QS1 S1 P S2 S Corn Producers want to produce more of the good where price is increasing, or at least, where the price is not going down. Broccoli 2. Alternative Output Price Change [Inverse] P2 QS2 P2 QS2


Slide 16:S Because cows produce more milk, farmers don’t have to have as many cows.[saves $] S P 3. Technological Improvement [Cow Waterbeds] We love these cow waterbeds because we get better blood flow and can produce 30% more milk. Supply curve moves “udderly” to the right. Less skin abrasions so happier cows produce more milk. Mooooove over and give me that waterbed. Waterbedsforcows.com


Slide 17:NFL Supply of FB games increased when the XFL was formed. S2 QS1 QS2 XFL in 2001 4. Number of Suppliers [Direct] Because of the XFL’s cheerleaders many called this league, not the XFL, but the Supply of FB games each week XXXFL XFL [Extreme Football League] 8 new teams More games each year


Slide 18:If the Bubba Gump Shrimp Company expects shrimp prices to increase more in the future, they will supply (more/less) shrimp to the market now. If the Bubba Gump Shrimp Company expects shrimp prices to decrease more in the future, they will supply (more/less) shrimp to the market now. S1 5. Producer Expectations about Future Price [“INVERSE”] P S2 S2


Slide 19:S3 [Direct] P 6. Subsidies - free money from government Free money from the government (subsidies) induces suppliers to supply more. S1 S2 If subsidies are taken away, then suppliers are losing money and will decrease supply.


Slide 20:S3 [Inverse] P 7. Taxes Take Away Business Profits & Decrease Supply. If business have their taxes decreased, it moves the supply curve to the right. S1 S2 If business have their taxes increased, it moves the supply curve to the left. I’m losing profits.”


Slide 21:The End Buy the whole macroeconomics course at Animationeconomics.com