Chapter 6 Prices

Bell ringer 3/27 Draw a supply and demand curve on the same graph. From there, show what would happen if there were an increase in supply and a decrease in demand. Make sure to label your original curves S1 and D1.

Combining Supply & Demand Equilibrium – The point at which quantity demanded and quantity supplied are equal – In the market equilibrium, prices adjust to make the quantity supplied equal to the quantity demanded.

Equilibrium

Disequilibrium Any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market – Excess Demand-When quantity demanded is more than quantity supplied – Excess Supply-When quantity supplied is more than quantity demanded

Bell ringer 11/5 Describe inelastic and elastic SUPPLY in your own words. After defining each think of two examples for each with a partner

Graph the following schedule on a supply and demand curve. Be sure to label the equilibrium. What is the market equilibrium price? From there illustrate a scenario where we see an increase in demand. Label your new equilibrium “E2”. Price of a slice of Pizza Quantity Demanded Quantity SuppliedResult $ Shortage from excess Demand $ Shortage from excess Demand $ Equilibrium $ Surplus from excess supply $ Surplus from excess supply $ Surplus from excess supply

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Bell ringer 11/6 Explain why a business owner will lower the price of products that are not selling quickly? Describe when a business owner might have the incentive to raise prices. Think about when a firm raises its prices, explain what that says to the consumer about the demand for the product.

Changes in Market Equilibrium Why does the market move toward equilibrium levels? Excess demand will lead firms to raise prices. Higher prices induce the quantity supplied to rise and the quantity demanded to fall until the 2 values are equal.

Role of Prices Prices serve a vital role in a free market economy. Prices help move land, labor, and capital into the hands of producers.

Answer the following with your bell ringer for today Explain why the toy store from the video was able to raise its prices for hula hoops.

Answer the following with your bell ringer for today Describe “Silly Bandz” plans to keep demand high for their product. Would there ever be a time when Silly Bandz would have to drop their prices? Explain.

Bell ringer 11/7 Describe 2 ways that prices can serve as their own language between producers and consumers. In other words, explain ways that producers and consumers communicate with each other through prices. (4 minutes)

Turn to a partner, hand them your bell ringers to compare. Circle anything that was similar to what you thought of. If you thought of something different, write it in their notebook. Be sure to write your initials with their bell ringer for today. (3 minutes)

The Advantages of Prices Prices provide a language for buyers and sellers. Price as an Incentive – Buyers and sellers alike look at prices to find information on a good’s demand and supply. – laws of supply and demand describe how people and firms respond to a change in prices.

-Prices as Signals – Prices as a traffic light. – A relative high price is a green light that tells producers that a specific good is in demand and that they should use their resources to produce more. A low price is a red light. – For consumers, a low price is a green light to buy more of a good. A high price is a red light to stop and think carefully.

Price Ceilings Maximum price set by law, that sellers can charge for a good or service Ex. Rent control

Price Floors A minimum price, set by the government – Imposed when government wants sellers to receive some minimum reward for their efforts EX. Minimum wage

Shifts in Supply Since market equilibrium occurs at the intersection of a demand curve and a supply curve, a shift of the entire supply curve will change the equilibrium price and quantity.

Shifts in Demand Fads cause shifts in the demand curve.

Flexibility – In many markets, prices are much more flexible than output levels. – Supply Shock-a sudden shortage of a good, such as gasoline or wheat Price System is “Free” – Free market pricing attempts to distribute goods through millions of decisions made daily by consumers and suppliers.

A Wide Choice of Goods – One of the benefits of a price-driven economy is the diversity of goods and services consumers can buy. Efficient Resource Allocation – Efficient resource allocation means that economic resources-land, labor and capital-will be used for their most valuable purposes. 2 Exceptions of Efficient Resources – Imperfect Competition (higher prices can affect consumer decisions) – Spillover Costs-costs paid by customers

Bell ringer 11/10 Create your own supply and demand curve. Be sure to label each as D1 and S1. Label your equilibrium as E1. From there show a scenario where there would be an increase in demand. Label your new demand as D2 and your new equilibrium as E2. From there show an increase in supply. Label the new supply curve as S2 and new equilibrium as E3.

Government Intervention Markets tend towards Equilibriums but in some cases the government steps in to control prices – Price Ceilings – Price Floors

Reviewing shifts in supply and demand-Illustrate each on a supply and demand curve 1. If the cost of coffee beans increases, which way will the supply or demand move for coffee in the United States? 2. If the price of hot dogs increases which way will the supply or demand move for hot dog buns? 3. If the government places a tax on foreign oil, which way will the supply or demand move for gasoline in the U.S.?

On back of Gov intervention wksht Define Black market and provide and example.

lessons/Black-Friday-Lesson-TCI.pdf