Y10 Econ Week 3
Please review demand and demand curves, etc. here: https://www.economicshelp.org/microessays/equilibrium/demand/ (Note: this also talks about price elasticity of demand, which we have not covered yet. We will cover that soon.)
Law of Demand and Law of Supply
The Law of Demand is that price and quantity demanded have an inverse relationship. When price goes down, quantity demanded goes up. When price goes up, quantity demanded goes down. Like the Disco dance I did for you.
The Law of Supply is just the opposite: Quantity supplied and price have a direct relationship. When price goes up, more is supplied. When price goes down, less is supplied.
The Law of Supply and Demand is that these two things meet in the middle in a normal market. That is called equilibrium.
Demand Shifting
HISAGE
I gave you this acronym to remember the things that often shift demand: HISAGE.
- Habits, fashion, and tastes
- Income
- Substitutes and complements
- Advertisement
- Government policies
- Economy (Is it good? Are we spending a lot right now? Or are people saving all their money because they think the world is ending?)
Just Some Examples of HISAGE
Five reasons demand may increase (demand curve shifts right)
- Income goes up (for normal goods) (I in HISAGE)
- Income goes down (for inferior goods) (I in HISAGE)
- Substitutes cost more (S in HISAGE)
- Advertisements make people want more (A in HISAGE)
- Complements cost less (S in HISAGE)
Five reasons demand may decrease (the demand curve shifts left)
- Consumer tastes change so people want less of the product (H in HISAGE)
- Credit card interest rates go up so people demand less of products bought on credit (I in HISAGE)
- Consumers expect prices will go down soon, so they buy less right now (E in HISAGE)
- People lose their jobs during a recession (E/I in HISAGE)
- Tariffs go down, so imported substitutes are cheaper (S in HISAGE)
PPF Review
Please also review PPF things to keep it fresh in your mind. Based on the worksheet, much of the class struggles a bit with a few aspects of PPF.
You can read this to help: https://www.economicshelp.org/microessays/ppf/