Graphing Heaven

Steps to Drawing a Supply and Demand Graph

D

S

0

Price ($)

Quantity (Q)

P1

Q1

Draw the axes

Label the axes

Draw the curves

Label the curves

Find and label the starting price and quantity

E

5 Steps to Graphing Heaven

Step 2- Read the situation and answer questions 1, 2, and 3

Situation- Consumers love big screen TV’s. What impact does this have on the price and quantity of big screen TV’s?

1. Which determinant of supply or demand is affected?

Demand Determinants (SEPTIC) Supply Determinants

1. Substitutes

2. Expectations

3. Population

4. Taste

5. Income

6. Complements

Expectations

Number of Suppliers/Producers

Cost of Production

Taste!

5 Steps to Graphing Heaven

Step 2- Read the situation and answer questions 1, 2, and 3

Situation- Consumers love big screen TV’s. What impact does this have on the price and quantity of big screen TV’s?

2. What is affected supply or demand?

3. Which way does the curve shift?

Demand!

Away from 0, from D1 to D2

5 Steps to Graphing Heaven

Step 3- Draw the shift and label everything

D1

S

0

Price (P)

Quantity (Q)

P1

Q1

D2

P2

Q2

5 Steps to Graphing Heaven

Step 4- Answer question 4

D1

S

0

Price (P)

Quantity (Q)

P1

Q1

D2

P2

Q2

4. Movement along which curve?

∆Qs; Movement along the S curve

5 Steps to Graphing Heaven

Step 5- Answer questions 5 (both parts)

D1

S

0

Price (P)

Quantity (Q)

P1

Q1

D2

P2

Q2

5. What happens to price?

Price increases from P1 to P2

5 Steps to Graphing Heaven

Step 5- Answer questions 5 (both parts)

D1

S

0

Price (P)

Quantity (Q)

P1

Q1

D2

P2

Q2

5. What happens to quantity?

Quantity increases from Q1 to Q2

Determinants of Demand and Supply 11. Determinants of Demand: Reasons for

Change/ Shift in Demand (SEPTIC) A change in:

Price of Substitutes- things that replace each other: pork v. beef, pinto beans vs. black beans, TV shows and video rentals (If P of Substitute ↑, D for other good ↑) (If P of A ↑, D for B ↑).

Consumer Expectations-if they expect a change in prices or their income

Determinants of Demand and Supply 11. Determinants of Demand: Reasons for

Change/ Shift in Demand (SEPTIC) A change in:

Population: Number of consumers, more or less people

Consumer Taste- preferences, styles, fads, fashion, health, advertising, popularity

Determinants of Demand and Supply 11. Determinants of Demand: Reasons for

Change/ Shift in Demand (SEPTIC) A change in:

Income (y) (If Y ↑ , D ↑. If Y↓, D↓) Steak, Sports Car

Price of Complements- things that go together: ketchup and fries; movies and popcorn, cars and gasoline (If P of Complement ↑, D for other good ↓) (If P of A ↑, D for B ↓).

Determinants of Demand and Supply 12. Determinants of Supply: Reasons for

Change/ Shift in Supply (GETNoCredit) A change in:

Expectations- businesses expect a change to occur to sales, profits, etc.

Government Policies - taxes, regulations,tariffs, quotas, setting prices, or any other government action.

Determinants of Demand and Supply 12. Determinants of Supply: Reasons for

Change/ Shift in Supply (GETNoCredit) A change in:

Technology- increases the efficiency of your natural, human, capital, and entrepreneurship resources.

Number of Suppliers- Companies entering or leaving the market.

Determinants of Demand and Supply 12. Determinants of Supply: Reasons for

Change/ Shift in Supply (GETNoCredit) A change in:

Costs of Production- anything that increases or decreases the cost of your land , labor, capital, and entrepreneurship.