Chapter 6 Prices More real world situations

Prices Bring Markets to Balance Market Price: price that willing consumers pay to a willing producer for the sale of a good or service. Market Price is found by: looking at consumer and producer interactions. Consumers send signals to producers: about whether a product is priced too high or too low.

What Happens When the Price isn’t “Right”? Disequilibrium: Formed when market price is set above or below the equilibrium price Leads to excess demand or to excess supply Excess Supply – Supply exceeds demand, Price is too high Excess Demand – Demand exceeds supply, Price too low $15.00 Equilibrium Ex) $ 10.00 $5.00

Excess Demand ---> Shortages To get back to equilibrium, price would need to rise

Excess Supply ---> Surplus Excess surplus To get back to equilibrium, price would need to go down insert think pair share slide before this

How Price is Affected by Demand Shift New market

How Price is Affected by Supply Shift

What do the Shifts Tell Us? What do you think the shifts tell us (Hint: There’s 3 things) jot down your thoughts

What do the Shifts Tell Us? Changes in prices…. Tells producers how much to produce Tells producers how much to charge Shows buyer’s interest (demand) for a product Prices give incentives---> encourages producers to produce more to make a profit Allows markets to adjust to changing conditions Able to respond to global issues able to use resources efficiently

Think-Pair-Share When the government decides that prices are too high or too low, it gets involved in 2 ways. What do you think those ways are? Try and think of real world examples if you can.

What Happens when the Government is Involved? Government affects prices in 2 ways: Price Ceilings: setting a MAX price Price Floor: setting a MINIMUM price It can be difficult to stop government interference due to political influences from those who it benefits Price Ceilings and Floors- Economics 2.6 Max. Price Min. Price

What Happens when the Government (federal, state, or local) is Involved? What are some examples of Price Ceilings? ________________________________________________________ What are some examples of Price floors? Max. Price Min. Price

How to you Determine a shortage or surplus? Shortage=Quantity Demanded - Quantity Supplied QD - QS Surplus=quantity supplied – quantity demanded Qs - QD

Black Markets Black markets: an illegal market where goods are traded at prices or quantities higher than those set by law. They are usually created in response to government controls that can create shortages or surpluses