How Is Price Affected by Supply and Demand

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How Is Price Affected by Supply and Demand?
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Supply of a Product

• Supply and Price have an inverse relationship
• As supply increases, price decreases
• As supply decreases, price increases

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Consumer Demand for a Product

• Demand and Price have a direct relationship
• As demand increases, price increases
• As demand decreases, price decreases

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Historical Scenario 1

• In the early 1900s, Henry Ford perfected the
  assembly line for his Ford Motor Company.
• How did the assembly line affect the supply of
  cars in the U.S.?
• How did the assembly line affect the demand of
  cars in the U.S.?
• How did the assembly line affect the price of
  cars in the U.S.?

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Historical Scenario 1
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Historical Scenario 2

• During the 1920s, societal values changed.
  Americans voted for the prohibition of alcohol,
  which was enacted with the 18th amendment to the
  U.S. Constitution.
• What does prohibition mean?
• How did this impact the supply of alcohol?
• How did this impact the demand of alcohol?
• How did this impact the price of alcohol?

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Historical Scenario 2
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Historical Scenario 3

• During WWII, the government limited the supply of
  consumer goods available to U.S. citizens (such
  as rubber, pantyhose, butter, meat, sugar, and
  gasoline).
• What were these limits called?
• What was the purpose of these limits?
• How did these limits affect the price of these
  goods?
• How did the government control the peoples
  demand for these goods?

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Historical Scenario 3