Module 5

Supply and Demand:

Introduction and Demand
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
 Government of Sharjah ‫حكومــــــــــة الشارقـــــــــة‬
Sharjah Private Education Authority ‫هيئة الشارقة للتعليم الخاص‬
Al Rushed American Private School ‫مدرسة الرشد األمريكية‬
‫الخاصة‬
Subject: AP Microeconomics
Week/ Term: Week 9/ Term 1
Standard: MKT. 4. A: Draw an accurately labeled
graph or visual to represent an economic model
or market.
Section 2/ Module 5 : Supply and Demand/
Introduction and Demand
Objective/Learning Target: By the end of the Session
To be able to
1.(Day 1): Identify, Define, and graph demand /
demand curve.
2.(Day 2): Define, compare, and create a model of
shifts in demand.
3. (Day 3): Read, differentiate, and create the
What you will learn in this
Module:
• What a competitive market is and how it
is described by the supply and demand
model

• What the demand curve is?

• The difference between movements

along the demand curve and changes in
demand

• The factors that shift the demand curve

Section 2 | Module 5
 Can you guess today’s learning
objective?

Recap Your
Previous
Knowledge
 Vocabulary
• Competitive Market
• Supply and Demand
Model
• Demand schedule
• Quantity demanded
• Demand curve
• Law of Demand Section 2 | Module 5
 Supply
Supply and
and Demand:
Demand: A
A Model
Model of
of aa Competitive
Competitive Market
Market
• A competitive market:
Basic Idea
– Many buyers and sellers
– Identical good or service
• The supply and demand model is
a model of how a competitive
market works.
i

• Five key elements:

– Demand curve
– Supply curve
– Demand and supply curve shifts
– Market equilibrium
– Changes in the market equilibrium Section 2 | Module 5
Demand Schedule and Demand Curve
Price Quantity
Pric
e $8 3
$7 5
$6 7
$5 10
$4 12
$3 16
$2 22

Quantity
Section 2 | Module 5
Understanding Shifts of the Demand Curve

• Increase = right, Decrease = left

• M.E.R.I.T. shifts demand

• market size (number of consumers)

• expectations

• related prices (complements, substitutes)

• income (normal, inferior)

• tastes Section 2 | Module 5

 The Demand Schedule and the
Demand Curve
A demand curve is the graphical
representation of the demand schedule; it
shows how much of a good or service
consumers want to buy at any given price.

Figure 5.2
An Increase
in Demand

Section 2 | Module
 Shifts of the Demand Curve
An increase in the Demand Schedules for Cotton

population and other Quantity of cotton demanded

factors generate an Price of cotton
(per pound)
(billions of pounds)

increase in demand – a
rise in the quantity in 2012 in 2013
demanded at any given $2.00 7.1 8.5
price. 1.75 7.5 9.0
This is represented by the 1.50 8.1 9.7
two demand schedules: 1.25 8.9 10.7
•One showing demand in
1.00 10.0 12.0
2012, before the rise in
0.75 11.5 13.8
population.
0.50 14.2 17.0
•The other showing
demand in 2013, after the Section 2 | Module 5

rise in population.
Shifts of the Demand Curve
A shift of the demand curve
is a change in the quantity
demanded at any given
price, represented by the
change of the original
demand curve to a new
position, denoted by a new
demand curve.

Section 2 | Module 5
Figure 5.2 An Increase in Demand
Section 2 | Module 5
 A movement along the
demand curve is a
change in the quantity
demanded of a good
that is the result of a
change in that good’s
price.

Figure 5.3 A Movement Along the Demand Curve Versus a

Shift of the Demand Curve Section 2 | Module 5
 Shifts of the Demand
Curve
An “increase in
demand”
means a
rightward shift
of the demand
curve: at any
given price,
consumers
demand a larger
quantity than
before.
(D1D2)
Figure 5.4 Shifts of the Demand Curve
Section 2 | Module 5
 CHILLI CHALLENGE

TASK 1 TASK 2 TASK 3

Section 1 | Module 4
 Understanding Shifts of the Demand
Curve
Changes in the Prices of Related Goods
– Substitutes: Two goods are substitutes if a fall in
the price of one of the goods makes consumers less
willing to buy the other good.
– Complements: Two goods are complements if a fall
in the price of one good makes people more willing to
buy the other good.
Changes in Income
– Normal Goods: When a rise in income increases the
demand for a good - the normal case - we say that the
good is a normal good.
– Inferior Goods: When a rise in income decreases the
demand for a good, it is an inferior good.
 Understanding Shifts of the Demand
Curve
• Changes in Tastes
– Economists usually lump together
changes in demand due to fads,
beliefs, cultural shifts, and so on
under the heading of changes in
tastes, or preferences.
• Changes in Expectations
– Expectations of a future drop in
price lead to a decrease in demand
today.
– Expectations of a future rise in
price are likely
to cause an increase in demand
Section 2 | Module 5
today.
 Individual Demand Curve and the Market Demand
Curve
The market demand curve is the horizontal sum of the individual
demand curves of all consumers in that market.

Figure 5.5 Individual Demand Curves and the Market

Demand Curve Section 2 | Module 5
Table 5.1 Factors That Shift Demand
Section 2 | Module 5
Reflection Check your Learning
Time Skills.
Extend
• 2 Things I learned
today.
____________________________
_____
• 1 Question I Still
Have………………..
____________________________
_____
• What confused me the
Section 2 | Module 5
 Refer to the given Graph
Exit Slip

Section 1 | Appendix 1

Section 2 | Module 5
Related Links

1.https://quizizz.com/admin/quiz/
5d88ddc91bdad5001a8dfd00?
source=quiz_share
2.https://quizizz.com/admin/quiz/
60401bcf6d19ca001b7a9cc3/shifts-in-
demand-practice?fromSearch=true&source=
3.https://quizlet.com/153682004/module-5-
supply-and-demand-introduction-and-
demand-flash-cards/
4.https://quizlet.com/33297470/krugman-
module-5-supply-and-demand-introduction-
and-demand-flash-cards/
Section 2 | Module 5
Homework Check your
understanding
Q: Explain whether each of the following events
represents
(i)a change in demand (a shift of the demand curve) or
(ii)a movement along the demand curve (a change in the
quantity demanded).
a. A store owner finds that customers are willing to pay
more for umbrellas on rainy days.
b. When XYZ Telecom, a long-distance telephone service
provider, offered reduced rates on weekends, its volume
of weekend calling increased sharply.
c. People buy more long-stem roses the week of
Valentine’s Day, even though the prices are higher than at
other times during the year.
d. A sharp rise in the price of gasoline leads many
commuters to join carpools in order to reduce their
gasoline purchases. Section 2 | Module 5
 Summary
1. The supply and demand model illustrates how
a competitive market works.
2. The demand schedule shows the quantity
demanded at each price and is represented
graphically by a demand curve.
3. The law of demand says that demand curves
slope downward.
4. A movement along the demand curve occurs
when a price change leads to a change in the
quantity demanded. When economists talk of
increasing or decreasing demand, they mean
shifts of the demand curve—a change in the
quantity demanded at any given Section 2 | Module 5
 Summary

5. There are five main factors that shift the

demand curve:
•A change in the prices of related goods or
services
•A change in income
•A change in tastes
•A change in expectations
•A change in the number of consumers
6. The market demand curve for a good or
service is the horizontal sum of the
individual demand curves of all
consumers in the market. Section 2 | Module 5