Warm up #69/18/2014  Page 154 questions 1,3,4-6. Write the questions and complete the answers in complete sentences.  Project Checklist (Must be done by today, glued on the poster board) 1. Big Graph (Supply & Demand) 2. Demand Schedule 3. Supply Schedule 4. Company Name on Poster

Price Controls Standard – SSEMI3 b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages.

Prices Functions of Prices in a Market System SSEMI2 d - Explain how prices serve as incentives in a market economy.

Price Controls Functions of Prices –  1. Prices Send Signals to both buyers and sellers. A high market price encourages sellers to produce more, but discourages buyers. A low market price discourages production, but encourages buyers  2. Prices Ration Goods – Price system is how goods and services are distributed – market clearing price  3. Prices Motivate- provide incentives for producers

Price Controls  Government involvement in the market  Price Floors – lowest legal price that can be charged Examples - Milk, grain, minimum wage Examples - Milk, grain, minimum wage  Price Ceilings – highest legal price that can be charged Examples – gas in the 1970’s, maximum prices for apartment rent controls, many products during WWI and WWIIExamples – gas in the 1970’s, maximum prices for apartment rent controls, many products during WWI and WWII ate/20COV.html?pagewanted=all&_moc.se mityn.www

Effects of Price Ceilings  Gov’t enforced price ceilings set below the market eq. price distort price signals and incentives – this causes shortages  Benefits the consumer EQ Price Price Ceiling S D

Effects of Price Floors  Gov’t enforced price floors cause persistant surpluses  They help the PRODUCER EQ Price Price Floor Market for Labor

It is the opposite of what you would think!  Price floors are up and cause surpluses  Price ceilings are down and cause shortages Price Floor Price Ceiling

Price Controls Group Activity  1. Form Groups – Move desks together  2. Assign Roles Recorder – Writes down answers all agree on Recorder – Writes down answers all agree on Situation Reader – Reads the situation – make sure everyone understands situation Situation Reader – Reads the situation – make sure everyone understands situation Graph Reader – Reads the graph – make sure everyone understands graph Graph Reader – Reads the graph – make sure everyone understands graph Solution Suggester – suggest solutions to questions for group to discuss. Solution Suggester – suggest solutions to questions for group to discuss.

Group Activity 2  Switch roles!  Rotate group roles to the right. Recorder – Writes down answers all agree on Recorder – Writes down answers all agree on Situation Reader – Reads the situation – make sure everyone understands situation Situation Reader – Reads the situation – make sure everyone understands situation Graph Reader – Reads the graph – make sure everyone understands graph Graph Reader – Reads the graph – make sure everyone understands graph Solution Suggester – suggest solutions to questions for group to discuss. Solution Suggester – suggest solutions to questions for group to discuss.