Why an iPhone X costs more than an iPhone 8… Unit 2 – Markets, Supply, Demand, and Price Supply and Demand Why an iPhone X costs more than an iPhone 8… Day 2

Objectives Define “Supply and Demand” and how price affects each Terms: Supply Demand Understand the Law of Supply and Law of Demand Equilibrium Price Shortage Surplus Identify problems when equilibrium price isn’t met

Remind me… What is price? How is that different from cost? And what is the point of money? What did those cookies have to do with anything? Today we look at how those are affected by Supply and Demand…

Supply and Demand SUPPLY DEMAND The willingness to SELL specific quantities of a good at different prices at a given time NOT the quantity you have on hand DEMAND The willingness to BUY specific quantities of a good at different prices at a given time NOT just having a “want”

What happened with the hot dogs? What does that teach us about the SUPPLY?

The Law of Supply The Quantity of a good Produced increases as its price increases There is a POSITIVE relationship between price and quantity

What happened with the hot dogs? What does that teach us about the DEMAND?

The Law of Demand The Quantity of a good Demanded increases as its price decreases There is a NEGATIVE relationship between price and quantity

So we have two “curves”… The point where they intersect is called… Equilibrium Price The price at which the quantity of a good demanded equals the quantity supplied Does NOT necessarily mean maximum profit What is the amount for our hot dogs?

Dangerous Curves Ahead… What if I DON’T match quantity… Market Shortage Sellers supply LESS than the quantity demanded at that price Market Surplus Sellers supply MORE than the quantity demanded at that price

Is that all? In a much later unit, we will discuss how governments sometimes mess with these curves as well. When we create price ceilings or price floors, we can prevent equilibrium Is there any time we’d WANT that?

Review What happens to the SUPPLY as the price increases? What happened to the DEMAND as the price increases? What could I do if I have a shortage? What could I do if I have a surplus?

Objectives Define “Supply and Demand” and how price affects each Terms: Supply Demand Understand the Law of Supply and Law of Demand Equilibrium Price Shortage Surplus Identify problems when equilibrium price isn’t met