Supply versus Demand Supply versus Demand

When the word MARKET is said, what are some things that come to mind? WHAT IS A MARKET? When the word MARKET is said, what are some things that come to mind? FLEA MARKET FARMERS’ MARKET GROCERY STORE WAL-MART HOUSING MARKET JOB MARKET Lets start with what a market is… when you hear market, what comes to mind? Walmart? The flea market? The stock market?

What do all of these examples have in common? WHAT IS A MARKET? What do all of these examples have in common? Buyers arrive with money looking to purchase things. Sellers offer goods or services in exchange for money. All of these things have something in common, buyers arrive with money to purchase something and sellers offer goods or services to exchange for that money. In your notes, draw a little illustration to show this exchange.

COMMON MARKET CHARACTERISTICS Buyers aren’t going to be satisfied if they think the money in their pockets is worth more than the items for sale. Sellers aren’t going to be satisfied if they think the items they are selling are worth more than the buyers are willing to pay. Both buyers and sellers have an incentive to reach a compromise price in order to both be satisfied. There are certain characteristics of all markets. First, buyers won’t be satisfied if the value of the money in their pockets is more than the item for sale. For example- if someone tried to sell you a bag of chips and they wanted $100 for it, you would probably keep your money, because you feel the money is worth more than the chips. Second, sellers won’t be satisfied if the items they are tying to sell have a higher value than what a buyer is willing to pay. A car salesman won’t sell you a brand new truck for $50 because it is valued at much more than that. Third, both the buyer wants to buy and the seller wants to sell, so there is more incentive to compromise so both can be satisfied– think of a pawn shop or flea market where you barter price back and forth.

THE MARKET ECONOMY THE WORLD’S ECONOMIES PROVIDE US WITH A LOT OF CHOICES AND THE WORLD’S SHOPPERS HAVE A LOT OF DIFFERENT INTERESTS. The market economy is booming here in America, we have many choices that cater to our interest. Just last night we talked about what we wanted to eat, did we want to go out or order in, what were we in the mood for… and then we had to decide between a few places that sell the same kind of things and we looked at what they offered and their prices to make our decisions.

THE MARKET ECONOMY IN AMERICA, WE HAVE A LOT OF FREEDOM TO DECIDE WHAT WE WANT TO DO WITH OUR LIVES AND HOW WE WANT TO SPEND OUR MONEY In America we have capitalism, meaning we have the opportunity to make and spend money more freely than in some other countries. I want you to discuss with a friend how a market economy is similar to our democratic type of government.

THE MARKET ECONOMY ALLOWS SELLERS TO COMPETE FOR CONSUMER DOLLARS SUPPLY DEMAND In a market economy there is always competition between sellers (think of black Friday)

PRICE OF LABOR WHY DOES THIS GUY MAKE $30,000,000? Something else we have to think of in a market economy is the price of labor. Why does someone like Lebron make 30 million a year but a fast food worker only makes minimum wage? Talk about it with your partner and check the next slide and see if some of your thought are on the right track.

THE ANSWER IS: SUPPLY AND DEMAND WE LOVE BASKETBALL, ESPECIALLY HIGH FLYING AND ACROBATIC DEFYERS OF GRAVITY ( HUGE DEMAND) THERE’S ONLY ONE LeBRON (TINY SUPPLY) WE LOVE FAST-FOOD THOUGH WE KNOW IT’S NOT GOOD FOR US (HUGE DEMAND) THERE ARE SEEMINGLY ENDLESS CHOICES FOR IT AND THE PROCESS OF MAKING IT DOESN’T REQUIRE UNIQUE SKILLS. JUST ABOUT ANYONE CAN FILL THE JOB. ( EVEN BIGGER SUPPLY) The price of labor breaks down to supply and demand. People love basketball, there is a huge demand for basketball; yet we don’t have a bunch of people who are talented enough to play professionally, so there is a tiny supply. People also love fast food (we all know I do), so there is also a huge supply of fast food; because this type of job does not require a certain skill set, there is a huge supply of people to do the job.

DO YOU KNOW WHAT THIS IS? It’s the Motorola DynaTAC 8000X , the world’s first cell phone. It went on sale March 6, 1983 and the initial price was $3995 ($9322 in current dollars). It had enough battery life for 30 minutes of talk, its memory could store 30 phone numbers, and there was a waiting list of thousands anxious to buy it.

Today we have phones that allows for all kinds of communication, video streaming, and downloads In our little cell phones, there is more technology then in the whole space ship that sent all of our astronauts to the Moon. HOW DID THAT HAPPEN?

THE ANSWER IS: SUPPLY AND DEMAND IN 1983, ONE COMPANY MADE CELL PHONES WITH VERY EXPENSIVE PARTS AND A GREAT AMOUNT OF COSTLY LABOR (TINY SUPPLY) PEOPLE WERE CRAZY ABOUT IT AND WAITED FOR MONTHS BEFORE DELIVERY (BIG DEMAND) IN 2011, MANY COMPANIES MAKE A VARIETY OF PHONES WITH VERY INEXPENSIVE PARTS AND VERY LITTLE HUMAN LABOR INVOLVED (HUGE SUPPLY) MOST CONSUMERS HAVE A PHONE AND SPEND MOST OF THEIR MONEY ON SERVICES (DEMAND IS SLOWING DOWN)

READ EACH STATEMENT BELOW AND DECIDE WHETHER THE PRICE OF THE ITEM WILL GO UP OR DOWN. ALSO, IS THIS BECAUSE OF A CHANGE IN SUPPLY OR DEMAND? A TICKET TO SEE YOUR FAVORITE FOOTBALL TEAM NOW THAT THEY’VE MADE THE PLAYOFFS A GALLON OF GASOLINE AFTER A HURRICANE SHUTS DOWN OIL DRILLING PLATFORMS IN THE GULF OF MEXICO. A BUSHEL OF CORN AFTER FARMERS IN IOWA DISCOVER A MORE POWERFUL FERTILIZER. A PAIR OF DESIGNER JEANS AFTER EVERYONE’S FAVORITE CELEBRITY IS SEEN WEARING THEM THE NIGHT BEFORE ON AN AWARDS SHOW. A BIG MAC AFTER RESEARCHERS DETERMINE THAT EATING TOO MUCH FAST FOOD CAUSES STUDENTS TO GET LOWER GRADES. Complete these examples in your notes…

SO, TO RECAP!!! IN ORDER FOR THE MARKET TO WORK IT MUST BE OPEN TO EVERYONE MARKETS ARE CREATED TO ALLOW BUYERS AND SELLERS TO PROFIT. SELLERS MAKE MONEY AND BUYERS GET THE ITEMS THEY’RE LOOKING FOR. THE PRICE HELPS BUYERS MAKE DECISIONS ON WHAT THEY WILL PURCHASE AND HELPS SELLERS DETERMINE WHAT THEY SHOULD PRODUCE. WAGES ARE DETERMINED BY THE SUPPLY AND DEMAND FOR THE JOB SKILLS OFFERED. Many of you are into Roshe’s (the shoes- for people like me who couldn’t care less about shoes). Using the words below and the information you learned in this PowerPoint, explain why these shoes are so darn expensive! (Underline the vocabulary terms in your explanation) Supply demand price market

IS ANYTHING IN THIS WORLD TRULY PRICELESS? Just for fun…