+ WEEK 4 Applications of Demand and Supply QUOTE HERE…

© 2013, published by Flat World Knowledge + Published by: Flat World Knowledge, Inc. One Bridge Street Irvington, NY © 2013 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement.

© 2013, published by Flat World Knowledge + 1. PUTTING DEMAND AND SUPPLY TO WORK Learning Objectives 1. Learn how to apply the model of demand and supply to the behavior of equilibrium prices and output in a variety of markets. 2. Learn basic vocabulary on the organization of firms and explain how the model of demand and supply can be used to understand prices of shares of stock.

© 2013, published by Flat World Knowledge + Personal Computer Shipments, Market Percentage Shares by Vendors, World and United States 2011

© 2013, published by Flat World Knowledge + The Personal Computer Market

© 2013, published by Flat World Knowledge + Increasing Demand for Crude Oil

© 2013, published by Flat World Knowledge + The Impact of Higher Gasoline Prices

© 2013, published by Flat World Knowledge The Stock Market A sole proprietorship is a situation in which one individual owns a firm. A partnership is a situation in which several individuals own a firm. A corporation is a situation in which shareholders own stock in a firm. Corporate stocks are shares in the ownership of a corporation. A stock market is a set of institutions in which shares of stock are bought and sold. Retained earnings are profits not paid out in dividends. Dividends are profits distributed to shareholders.

© 2013, published by Flat World Knowledge + Demand and Supply in the Stock Market

© 2013, published by Flat World Knowledge + A Change in Expectations Affects the Price of Corporate Stock

© 2013, published by Flat World Knowledge + 2. GOVERNMENT INTERVENTION IN MARKET PRICES: PRICE FLOORS AND PRICE CEILINGS Learning Objectives 1. Use the model of demand and supply to explain what happens when the government imposes price floors or price ceilings. 2. Discuss the reasons why governments sometimes choose to control prices and the consequences of price control policies.

© 2013, published by Flat World Knowledge + A minimum allowable price set above the equilibrium price Price Floor

© 2013, published by Flat World Knowledge + Price Floors in Wheat Markets

© 2013, published by Flat World Knowledge + Supply and Demand Shifts for Agricultural Products

© 2013, published by Flat World Knowledge Rental Price Ceilings The purpose of rent control is to make rental units cheaper for tenants than they would otherwise be Rent control is an example of a price ceiling Price ceiling a maximum allowable price set below the equilibrium price.

© 2013, published by Flat World Knowledge + Effect of a Price Ceiling on the Market for Apartments

© 2013, published by Flat World Knowledge + The Unintended Consequences of Rent Control

© 2013, published by Flat World Knowledge + 3. THE MARKET FOR HEALTH- CARE SERVICES Learning Objectives 1.Use the model of demand and supply to explain the effects of third-party payers on the health- care market and on health-care spending.

© 2013, published by Flat World Knowledge + THE MARKET FOR HEALTH-CARE SERVICES There has been much discussion over the past three decades about the health-care problem in the United States. Much of this discussion has focused on rising spending for health care

© 2013, published by Flat World Knowledge + Health -Care Spending as a Percentage of U.S. Output, 1960–2009

© 2013, published by Flat World Knowledge The Demand and Supply for Health Care To assess the market forces affecting health care, we will focus first on just one of these markets: the market for physician office visits.

© 2013, published by Flat World Knowledge + Total Spending for Physician Office Visits

© 2013, published by Flat World Knowledge The Demand and Supply for Health Care A third party payer is an agent other than the seller or the buyer who pays part of the price of a good or service. Consumers use more than they would in the absence of third-party payers Providers are encouraged to supply more than they otherwise would. The result is increased total spending.

© 2013, published by Flat World Knowledge + Total Spending for Physician Office Visits Covered by Insurance