2. THE HAPPY MARKET!!

3. MARKETS A PLACE OR SERVICE THAT ENABLES BUYERS AND SELLERS TO EXCHANGE GOODS, SERVICES AND RESOURCES

4. EXCHANGE GIVING UP SOMETHING TO GET SOMETHING Self-Interest and Mutual Benefit BARTERING DOUBLE COINCIDENCE OF WANTS HIGH TRANSACTION COST Market example

5. RELATIVE PRICE THE PRICE OF ONE GOOD EXPRESSED IN TERMS OF ANOTHER GOOD Example 1 -Example 1 Example 2 -Example 2 Example 3

6. DEMAND THE AMOUNT OF A GOOD OR SERVICE THAT PEOPLE ARE WILLING AND ABLE TO BUY AT VARIOUS PRICES DURING A GIVEN PERIOD OF TIME

7. QUANTITY DEMANDED THE AMOUNT OF A PRODUCT (OR RESOURCE) THAT PEOPLE ARE WILLING AND ABLE TO BUY AT A SPECIFIC PRICE

8. LAW OF DEMAND AS THE PRICE OF A PRODUCT GOES UP, THE QUANTITY DEMANDED GOES DOWN Substitution Effect Income Effect

9. DETERMINANTS OF DEMAND INCOME TASTES PRICES OF SUBSTITUTES PRICES OF COMPLEMENTARY GOODS EXPECTATIONS NUMBER OF BUYERS

10. THE FUN CONTINUES WITH…………….. SUPPLY

11. Supply The amount of a product or service, that producers are willing to make available, at various prices, during a given period of time.

12. Law of Supply As the price of a product or service increases, so does the quantity supplied. There is a direct relationship between price and quantity supplied.

13. DETERMINANTS OF SUPPLY COST OF INPUTS TECHNOLOGY NUMBER OF SELLERS PRICES OF RELATED GOODS AND SERVICES EXPECTATIONS OF SELLERS ACTIONS OF GOVERNMENT

14. CHANGES IN SUPPLY VS. CHANGES IN THE QUANTITY SUPPLIED

15. Goals for the Day Discuss and discover the concept of equilibrium. Define and calculate “surplus”. Define and calculate “shortage”. Understand how changes in supply and demand change equilibrium Understand different forms of market interference.

16. EQUILIBRIUM A point from which there is no tendency to move. The point at which quantity supplied and quantity demanded are equal. Markets work their way towards equilibrium.

17. SURPLUS Exists when the quantity supplied is greater than the quantity demanded. Occurs anytime price is above the equilibrium. Market forces will work towards eliminating the surplus.

18. SHORTAGE Exists when the quantity demanded is greater than the quantity supplied. Occurs anytime price is less than the equilibrium. Market forces will work to eliminate any shortage.

19. Changes in Equilibrium The equilibrium point will change as supply and / or demand change.

20. MARKET INTERFERENCE Price Ceilings Price Floors

21. Price Floor A situation where the price is not allowed to decrease below a certain level. Intended to help the supplier. Price Floors create disequilibrium. Surplus will exist. Example:

22. Price Ceiling A situation in which price is not allowed to rise above a certain level. Intended to help the consumer. Price Ceilings create disequilibrium. A shortage will exist. Example:

23. CONSUMER SURPLUS THE DIFFERENCE BETWEEN WHAT CONSUMERS WERE WILLING TO PAY AND WHAT THEY ACTUALLY DO PAY

24. PRODUCER SURPLUS THE DIFFERENCE BETWEEN WHAT THE PRODUCERS WERE WILLING TO SELL THEIR PRODUCT FOR, AND WHAT THEY ACTUALLY SELL IT FOR.