Did you get the POP Quiz from yesterday? It is due tomorrow! Grab a highlighter and a red pen or pencil!!!

Economics & Economic Decision Making Notebook Question: What should happen to price if demand increases? What should happen to price if supply decreases?

What are prices? How are prices established? PRICE: The VALUE (in dollars) society places on G&S, and is established by PRODUCERS & CONSUMERS

Recopy this Chart into your notebook PRICE QUANTITY DEMANDED QUANTITY SUPPLIED $30013 $25111 $2039 $1566 $10103 $5150

Graph both the supply and demand curves Vertical Axis: Go Up By 5s Horizontal Axis: Go Out By 3s Graph Demand (label with D) Graph Supply (label with S)

Bushels of Oranges Price in Dollars Quantity $ D S

“X” Marks the Spot EQUILIBRIUM: when a producer’s SUPPLY is EQUAL to a consumer’s DEMAND; both P and Q are the equal and the MARKET IS CLEARED.

Bushels of Oranges Price in Dollars Quantity $ D S What is the equilibrium price and quantity of this market? P = $15 Q = 6

Let’s continue with market graphs!!! Warm Up Questions: 1.What is a market? 2.Who has power in the market?

What would happen if the producer set the price at $25? At P = $25 SURPLUS: the quantity supplied is GREATER than the quantity demanded at a given price (QS > QD) Low Demand + High Supply = Extra Product

Bushels of Oranges Price in Dollars Quantity $ D S QS>QD = Surplus 11 – 1 = 10 extra

What would happen if the producer set price at $10? At P = $10 SHORTAGE: the quantity supplied is LESS than the quantity demanded at a given price. (QS < QD) High Demand + Low Supply = Not Enough Product!!

Bushels of Oranges Price in Dollars Quantity $ D S QD>QS = Shortage = 7 short

Drawing the Market a MARKET must always have a firm’s SUPPLY and a household’s DEMAND Price Quantity S1S1 D1D1 EQUILIBRIUM POINT P1P1 Q1Q1

Coffee Market, $2.50 Price Quantity of Coffee S1S1 D1D1 $2.50 Q1Q1

Market Scenarios: Orange Pickers Go On Strike, what will happen to the orange market? Which Curve is effected by this? Why? What should happen to price? Why LET’S GRAPH IT!!

Orange Pickers go on Strike: Price Quantity S1S1 D1D1 P1P1 Q1Q1 S2S2 P2P2 Q2Q2 If the workers are on strike…wouldn’t you expect prices to go up?...wouldn’t you also expect less oranges available? Does the model show this?? YES!!!

Orange Pickers go on Strike: Price Quantity S1S1 D1D1 P1P1 Q1Q1 S2S2 P2P2 Q2Q2 Now we can work on the WHY and HOW should you appropriately explain this market scenario!! ______________ of oranges will ____________ due to __________________; therefore the __________curve shifts ______________, as a result PRICE will _____________ SUPPLY DECREASE PRODUCTIVITY LEFT INCREASE!! SUPPLY

Oranges are found to cure cancer. Which curve is effected? What should happen to price? See if you can figure out what would happen in this market scenario!!

Orange Cure Cancer: Price Quantity S1S1 D1D1 P1P1 Q1Q1 P2P2 Q2Q2 D2D2 ______________ will ______________ due to __________________; therefore the curve shifts ________________, as a result PRICE will ________________ Demand INCREASE CONSUMER TASTES RIGHT INCREASE

DEMAND CHANGE RULES If Supply is constant: An increase in demand will ___________ price. A decrease in demand will ___________ price. DECREASE INCREASE

SUPPLY CHANGE RULES If Demand is constant: An increase in supply will ___________ price. A decrease in supply will ___________ price. DECREASE INCREASE

GRAPHING TIP SHEET Here is a tip sheet for you: All new scenarios will start with this: And your sentence will look like this: ____________ will ____________ due to _____________; therefore the curve will shift __________. As a result, price will _____________.

Scenarios to think about: Due to poor managing, Pepsi is forced to raise all of its prices 50% to make up some of the losses. How will this affect the price of Coca-Cola? Demand will increase; due to substitutes, the curve will shift right; price will increase.

Scenarios to think about: The 3M Corporation installs all new assembly lines in their factories world-wide How will this affect the price of Post-It notes? Supply will increase, due to technology, the curve will shift right; price will decrease.

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