Economics Warm-up 2. The new oven in Mr. Brown’s bakery allows him to produce bread more efficiently and more cheaply. What is the most likely effect? A. the price drops and the quantity demanded decreases B. The price rises and the quantity demanded decreases C. the price drops and the quantity demanded increases D. the price rises and the quantity demanded increases. 1. Consumers are told that the consumption of cauliflower will significantly reduce the risk of cancer. Which of these scenarios is likely to happen in the cauliflower market? A. The demand curve will shift to the left and the price of cauliflower will fall. B. The supply curve will shift to the right and the price of cauliflower will rise. C. The supply curve will shift to the right and the price of cauliflower will fall. D. The demand curve will shift to the right and the price of cauliflower will rise.

Economics Warm-Up Continued 3. Demand for orange juice increases at the same time that the supply decreases, which of these could explain that scenario? A. consumers hear that citrus-based sugars increase the risk of diabetes, while citrus crop suffer from a severe frost. B. Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers suffer from a severe frost. C. Consumers hear of the benefits of vitamin C contained in oranges, while citrus farmers enjoy their best harvest in years. Consumers hear that citrus-based sugars increase the risk of diabetes while citrus farmers enjoy their best harvest in years. 4. Which determinant MIGHT increase supply in the market? A. an increase in the price of complementary goods B. an increase in the number of sellers of a product C. an increase in the number of consumers in the market D. an increase in the price of inputs to make the product.

As you watch… Why was the guy willing to kiss amy? Relate it back to supply and demand http://www.bazinganomics.com/bazingan omics//the-high-price-of-insulin

Price elasticity One of the reasons economists are interested in how consumers respond to price is because it affects revenue.

For example If a business owner is attempting to raise company revenues by increasing the price of the product, she does not want the consumers to have a big response (she wants an inelastic product) because losing consumers takes away revenues gained by the increase in price.

For example… When she decreases the price of a product, she wants consumers to have a big response (an elastic product) in order to gain enough consumers to off set the loss in revenue from the price decrease.

Examples Inelastic Demand Elastic Demand IF a diabetic needs insulin in order to live, they are likely to purchase just as much even if the price rises significantly. Elastic Demand If the price of the snack you buy buys up, you will likely buy a much smaller quantity because you immediately substitute another snack since you have so many choices.

Examples Inelastic Supply Elastic supply We expect suppliers to produce more when prices go up, but sometimes producers are unable to respond to the price increase. A freelance journalist working from home may want to write ten more articles a week when the price of a freelance piece rises, but they may not be able to because of lack of hours. Elastic supply If a company currently operating at 70% of its capacity and the price of its product rises in the market, it can utilize some of its excess capacity quickly to take advantage of the higher prices.

Elastic Demand Inelastic Demand Elastic Supply Inelastic Supply

You each have been given a piece of paper with an item written on it. Warm-Up You each have been given a piece of paper with an item written on it. Decide whether that good is elastic or inelastic. Tape your choice in the appropriate spot on the dry erase board.

Perfectly Inelastic Supply

Elastic Supply

Perfectly Inelastic Demand

Perfectly Elastic Demand

Which is more inelastic? B C

Write it and Draw it Inelastic Demand/Supply: when the percentage change in the price of a good is greater than the percentage change in the quantity demanded of a good. Elastic Demand/Supply: when the percentage change in the price of a good is less than the percentage change in the quantity demanded of the good.

Now, to reinforce it! https://www.youtube.com/watch?v=HHcblIxiAAk