An Introduction to U.S. Markets.  Markets  How are prices set?

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Presentation transcript:

An Introduction to U.S. Markets

 Markets  How are prices set?

The Law of Demand  As the price of goods and services INCREASES, buyers may demand LESS goods and services.  As the price of goods and services DECREASES, buyers may demand MORE goods and services.

The Law of Supply  As the price of goods and services INCREASES, producers may offer MORE goods and services.  As the price of goods and services DECREASES, producers may offer LESS goods and services.

Price Setting  The price is set where demand and supply meet.

Equilibrium Price  The equilibrium price is the point where quantity supplied meets quantity demanded. This is the point where there is no incentive to move.

Equilibrium Price Supply = demand Supply Demand

When Demand Rises  Shifts demand curve to the right  Price rises, and quantity demanded rises

When Supply Rises  Shifts Supply Curve rightward  Price falls, Quantity demanded will rise

What happens to the DEMAND for bubble gum if research proves that each gum ball can increase I.Q.? Answer: Demand increases price for bubble gum rises

 What happens to the SUPPLY of toothpaste if toothpaste workers go on strike?  Answer:Supply of toothpaste falls Price of toothpaste rises

 What happens to the price of strawberries if a winter freeze damages the crop?  Answer:Price of strawberries rises

 What will happen to the SUPPLY of candy bars if new technology is developed which makes it easier for chocolate to be mixed with caramel?  Answer:Supply will increase Price will fall

 What will happen to the DEMAND for in- line roller skates if a new roller park opens in your neighborhood?  Answer:Demand for skates increases Price for skates rises

 What will happen to the PRICE of diamonds if any 8 th grader can produce them at school?  Answer: Price of diamonds will fall

 What will happen to the DEMAND for butter if the price of margarine falls?  Answer: Demand for butter decreases

 What will happen to the DEMAND for cereal if the price of milk increases?  Answer: Demand will decrease