Do Now  Explain what the 4 determinants of demand are…  What is the law of supply as prices go up supply…

Do Now  Which determinant of supply deals with the profits/expenditures businesses incur?  The market-clearing price is where what two curves intersect?

The Price System STANDARD 1.3.3

The Price System  Price is the language of economics  *The interaction of supply and demand determines the equilibrium price*  This equilibrium price is the compromise we live by everyday  e-1-4-stossel-2011-economics-of-voluntary-1/view e-1-4-stossel-2011-economics-of-voluntary-1/view

Market Equilibrium Market Equilibrium is when quantity supplied and quantity demanded are equal – Perfection!!!! Supply curve and demand curve intersect

Where does Equilibrium Occur on this chart?  At what price does equilibrium occur? How do we know again?

Supply-Demand Market Equilibrium D D A S S $500 Price per Xbox 360 Quantity in Billions of Xbox 360 per Year E g a

Shortage: “Not Enough!!” With shortages, price tends to rise until equilibrium is restored Things that might happen… –- Black markets –- Rationing – - Violence

Surplus: “Having too much” With surpluses, prices tend to fall until equilibrium is restored Things that might happen… –- Little re-sale value –- Lack of consumer interest –- Worthlessness

Managing Prices  Sometimes Governments set prices to protect producers and consumers  Price Ceiling: Government action that establishes a maximum price for a certain good  Price Floor: Government action that establishes a minimum level of prices.  Anything below it illegal

Please Sketch

Chapters 5 Part III Managing Prices  Explain why governments sometimes set prices.  Explain what governments try to accomplish through price floors and price ceilings, and rationing  Explain what happens when governments manage prices

Do Now  Define Equilibrium  Under what conditions does this event exist?

What’s a price ceiling? CONTINUE

Price Floor Example  An important example of a price floor is the **minimum wage**  Minimum Wage: the lowest allowed by the law in a state or country  A business cannot pay an employee lower than what the federal gov’t says (illegal)

 Do Now: In your opinion what is the “language” of economics?

 What are some benefits of raising the minimum wage?  What are some negatives of raising it?

 wage?utm_expid= orh-8EtwQu- dGtoBaX9aiA.0 wage?utm_expid= orh-8EtwQu- dGtoBaX9aiA.0  -after-fast-food-wage-protesters-block-mack- avenue -after-fast-food-wage-protesters-block-mack- avenue  /obama-on-raising-the-minimum-wage.html /obama-on-raising-the-minimum-wage.html   Michigan's minimum wage increased from $7.40 per hour to $8.15 per hour on Sept. 1., the equivalent of $16,952 per year for a 40- hour work week. An increase to $15 per hour would equal $31,200 per year for a 40-hour work week.

Anti-Minimum Wage  Businesses tend to fight against a higher minimum wage because their total costs will increase if they have to pay their employees more wages

Writing Tracker  Should we raise the minimum wage? Explain using examples and following the new structure

DO NOT WRITE Prisoner B stays silent Prisoner B Betrays/Testifie s Prisoner A Stays Silent Each serves 1 year Prisoner A 20 years Prisoner B goes free Prisoner A Betrays/Testifie s Prisoner A goes free Prisoner B 20 years Each serves 10 years

Writing Tracker Help:  Thesis: Statement of Purpose  Body Paragraph with intro Topic Sentence Reiterating your main idea  Evidence: Back up your argument with facts and “DATA”  Counter Argument: What the other side might say and why they are wrong  Conclusion: Restate Thesis

DO NOT WRITE  Because betraying a partner offers a greater reward than cooperating with them, all purely rational self- interested prisoners would betray the other, and so the only possible outcome for two purely rational prisoners is for them to betray each other  o/play/prisoners-dilemma/ o/play/prisoners-dilemma/

Problems with Price System  Public Goods: any good or service that is consumed by ALL members of a society  Police Protection, Fire protection, Schools

  Prisoners Dilemma Game Show!