Where does the price of a good or service come from?

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Presentation transcript:

Where does the price of a good or service come from?

 Supply and Demand  Determines Prices Supply Demand

 You own a tomato business  This year’s harvest was great, the supply is High  You have too many tomatoes, you have to get rid of them fast  You will lower the price to get them to buy

 You own a tomato business  This year’s harvest was bad, the supply is Low  Tomatoes are scarce  If people want them they will fight for them  You will raise the price to make more money

 You own a business  People LOVE your product, the demand is High  You will Raise the Price to make more money

 You own a business  People HATE your product, the demand is Low  You will lower the price to get them to buy

HIGH SUPPLY …LOW PRICE  Silly Bands  Flip Flops  Chevy Aveo  32 inch HDtv LOW SUPPLY …HIGH PRICE  Gold Bracelets  Pair of Jordan's  Bugatti  108 inch HDtv

HIGH DEMAND …HIGH PRICE  iPad  Fuel Efficient Cars  Pistachios LOW DEMAND …LOW PRICE  Coby Tablet  Gas Guzzler Cars  Walnuts

 Supply Price Quantity Supply $10 $9 $8 $

 Demand Price Quantity demand $10 $9 $8 $

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $ Surplus You made too many 1 pizza X $9 $9 throw out on 2 extras

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $ Deficit made too few 1 pizza X $7 $7 Missed out on 2 sales

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $ Equilibrium

 Supply and Demand Price Quantity Supply demand $10 $9 $8 $ Equilibrium 2 pizza X $8 $16 perfect

 How many Pizza Places in Rocky Mount?  Pizza Hut  Pizza King  Little Caesar’s  Papa John’s  Domino’s  Hema’s  Frank’s  Pyramid

 Let’s Open a Pizza Place!  Gereau’s Pizza What happens next?

 Supply and Demand Price Quantity Sold Supply demand $5 $10 $ $10

 Supply goes up Price Quantity Sold Supply demand $5 $10 $

 Town Council writes a new ordinance  “All Pizza must use FRESH INGREDIENTS”  Most pizza places go out of business  Supply goes DOWN

 Supply goes down Price Quantity Sold Supply demand $5 $10 $

 Supply and Demand Price Quantity Sold Supply demand $5 $10 $

Pizza is Healthy

 Demand Goes Up Price Quantity Sold Supply demand $5 $10 $

Pizza is made from Humans!!!

 Demand goes down Price Quantity Sold Supply demand $5 $10 $