Review! 1.What are the two main points of the Law of Demand? 2.What are the two main points of the Law of Supply? 3.What is Profit? 4.What is Elasticity.

Slides:



Advertisements
Similar presentations
Combining Supply and Demand
Advertisements

Chapter 6 notes Prices.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
Economics: Principles in Action
18 SUPPLY AND DEMAND.
Combining Supply and Demand (Ch. 6-1)
Presentation Pro © 2001 by Prentice Hall, Inc. Economics: Principles in Action C H A P T E R 6 Prices.
6-1 Combining Supply and Demand
Equilibrium Price When the Laws of Supply and Demand Collide.
Today is your lucky day! You just won $1000!!! Write down at least 5 things that you will buy with your money. ~WARM UP~ WARM UP.
As the price of a product increases, consumers buy less of a product
Unit II: Demand and Supply
Equilibrium Economics Mr. Bordelon.
 Desire to want something and the ability to pay for it.
Chapter 6 Prices.
Chapter 6SectionMain Menu Opening Act: Monday 11/29 Take out a Pen or pencil and open your binders to a new piece of paper Answer the following questions.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
Chapter 6SectionMain Menu Combining Supply and Demand Objective: How do supply and demand create balance in the marketplace? What are differences between.
Presentation Pro © 2001 by Prentice Hall, Inc. Economics: Principles in Action C H A P T E R 6 Prices.
Economics Chapter 6 Bringing Supply and Demand Together.
Chapter 6: Prices Section 1. Copyright © Pearson Education, Inc.Slide 2 Chapter 6, Section 1 Objectives 1.Explain how supply and demand create equilibrium.
Combining Supply and Demand 10/25/2015Ch 6.12 Balancing the Market 10/25/20153Ch 6.1 The point at which quantity demanded and quantity supplied come.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
Chapter 6 Prices. Combining Supply & Demand Equilibrium – The point at which quantity demanded and quantity supplied are equal – In the market equilibrium,
Chapter 6SectionMain Menu PRICES Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a.
Students will explain how the Law of Demand, prices, and profit work to determine production and distribution in an economy.
CH. 6 PRICE$ Mrs. Post – CHS Adapted from Prentice Hall Presentation Software.
Chapter 6SectionMain Menu Price per slice Equilibrium Point Finding Equilibrium Price of a slice of pizza Quantity demanded Quantity supplied Result Combined.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market.
Chapter 6SectionMain Menu Price per slice Equilibrium Point Finding Equilibrium Price of a slice of pizza Quantity demanded Quantity supplied Result Combined.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
Chapter 6 Equilibrium. The Role of Prices In the Chips Activity.
Chapter 6 Prices. Combining Supply and Demand Chapter 6, Section 1 Equilibrium.
Chapter 6SectionMain Menu Combining Supply and Demand How do supply and demand create balance in the marketplace? What are differences between a market.
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.
Economics: Principles in Action
Equilibrium The point where quantity demanded and quantity supplied come together is known as equilibrium. It is the point of balance between price and.
Price of a slice of pizza Combined Supply and Demand Schedule
Combining Supply and Demand
Chapter 6 Prices (section 1) Combining Supply and Demand.
Economics: Principles in Action
Combining Supply and Demand
Combining Supply and Demand
Prices In The Market.
Introduction to Economics Johnstown High School Mr. Cox
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Chapter 6 Prices.
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
The Last Part of Chapter 3
Combining Supply and Demand
Chapter 6: Prices Economics Mr. Robinson.
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Combining Supply and Demand
Price of a slice of pizza Combined Supply and Demand Schedule
Prices In The Market.
Combining Supply and Demand
Economics Created by Educational Technology Network
Economics: Principles in Action
Presentation transcript:

Review! 1.What are the two main points of the Law of Demand? 2.What are the two main points of the Law of Supply? 3.What is Profit? 4.What is Elasticity of Demand? 5.What is Elasticity of Supply?

Law of Demand: As price goes up, demand goes down. As price goes down, demand goes up. Law of Supply: As price goes up, supply goes up. As price goes down, supply goes down. Profit: The difference between the cost to produce a good and what it is sold for. Elasticity of Demand: How sensitive demand is to a change in price. Elasticity of Supply: How sensitive supply is to a change in price.

Demand Curve Price per Slice of Pizza Quantity of Slices Demanded $ $ $ $ $ $3.0050

Supply Curve Price per Slice of Pizza Quantity of Slices Supplied $ $ $ $ $ $3.0050

So, What happens if we combine the two?

Equilibrium Price When the Laws of Supply and Demand Collide

Equilibrium Def. The point at which quantity demanded and quantity supplied come together.

Equilibrium Price per Slice of Pizza Quantity of Slices Supplied Quantity of Slices Demanded $ $ $ $ $

Disequilibrium If the market price or quantity supplied is anywhere but at equilibrium price, the market is in a state called Disequilibrium. Interactions between buyers and sellers will always push the market back towards equilibrium… UNLESS THE GOVERNMENT INTERFERES

Government Interference In some cases, the government steps in to control prices. These interventions appear as price ceilings and price floors.

Price Ceiling Def. A maximum price that can be legally charged for a good. Ex. Rent Control: a situation where the government sets a maximum amount that can be charged for rent in an area. Usually only in large cities, such as New York or Los Angeles

Price Floor Def. A minimum price, set by the government, that must be paid for a good or service Ex. Minimum Wage; sets a minimum price that an employer can pay a worker for an hour of labor. Ex. Luxury or “Sin” Taxes; Items like alcohol, cigarettes, and gasoline have extra taxes, creating a price floor.

Problems with Price Floors and Ceilings Price ceilings and floors prevent markets from reaching equilibrium. They prevent suppliers from producing as much as price dictates or prevent consumers from buying as much as they wish Ex. Rent control prevents landlords from getting full value for their property. Ex. Cigarette taxes prevent people from buying cigarettes, hopefully reducing the number of smokers.

Changes in Equilibrium The point where supply and demand meet can change for 3 reasons:

1. Change in Supply Excess Supply leads to a surplus (when supply is greater than demand). This leads to a decrease in price and an increase in demand. –Ex. After Christmas, stores have clearance sales to get rid of surplus merchandise A decrease in supply leads to an increase in price. This leads to a decrease in demand.

2. Changes in Demand If there is a shortage, when demand is greater than supply, price rises, which increases supply and decreases demand. –Ex. Tickle Me Elmo dolls sold out at the stores, so on Ebay price of the dolls skyrocketed When demand falls, suppliers cut prices and find a new equilibrium

3. Change in Price As prices change, supply and demand will both change.

So why are prices so important? Prices are vital in a free market economy. They help move land, labor and capital into the hands of producers and finished goods into the hands of buyers. Price is a language both consumers and producers can use to determine value.

Advantages of Prices 1.Prices as an Incentive Prices communicate to buyers and sellers whether goods or services are scarce or easily available. They encourage or discourage production. 2.Prices as Signals Prices act like a traffic light. A high price (green light) tell producers to make more, while a low price (red light) tell producers to make less.

Advantages of Price (cont.) 3. Flexibility of Prices Prices are generally more flexible than production levels and can be easily increased or decreased to reach equilibrium. 4. Price System is “Free” A distribution system based on prices costs nothing to administer, unlike in command economies.

How does scarcity of an item affect its price? If there is a scarcity of an item, then the price will be high. Ex. Gasoline

How does a boycott affect the price? If an item is being boycotted, then the price often will go down. Ex. If everyone stopped buying gas, the price of gas would drop.

How does the War in Afghanistan affect the price of certain items? Price of many items have increased. –Ex. Gas, security If the war continues, we can expect the price of many items to increase –Ex. Foods, metal