1. Supply
The amount of a good service that producers are willing and able to offer for sale at each possible price during a given period of time

2. Law of supply
As the price of a good or service rises (or falls, the quantity of that good or service also rises (or falls)
Direct relationship
P ^ Q ^
P Q

4. Supply Notes! http://www.youtube.com/watch?v=6Q_XxwqtwxY
Jigsaw reading: “Breakfast costing us more”
1- first section
2- bacon
3- coffee
4- orange juice
Share with group – complete the questions

5. Profit Supply is affected by profit potential.
Profit = Total revenue – Total cost

6. Supply Notes Supply schedule: Supply curve:
Listing of quantities at all prices
Supply curve:
Graph version of schedule

7. Supply notes Factors that affect the shift of the curve
Cost of production decreases/increases – when prices increase the desire to make a profit encourages producers to increase production
Technology improvements
Seller expectations
Competition
Opportunities in different markets (good/bad)

8. Factors continued Natural events (ex. Good crop year/ much supply)
Government (taxes, regulations, and subsidies)
PRICE MOVES ALONG THE SLOPE OF THE CURVE

9. Practice graphing
Graph original market supply

10. Question? Why are there differences in prices?
Why are some prices low, some middle, and some higher?
Could it be that because of the different incomes?

11. Price- the amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.
Incentive- any reward or benefit, such as money, advantage, or good feeling that motivates people to do something.

12. Definitions
Write what you believe the definitions of each pricing factor is on your handout.

13. Pricing signals
Prices send signals to a buyer (similar to the signals that a traffic light sends to a driver)
Green light – BUY
Yellow light – caution
Red light – do not buy
Some prices lead a consumer to make a purchase.
Some prices make a consumer stop and think about a purchase.
Some prices make consumers stop their purchasing decision process.

14. Terms and definitions
Competitive pricing- setting the price of a product or service based on what the competition is charging
Expenses – payments for goods and services
Revenue- the money a business receives from customers who buy its goods and services. Not to be confused with profit.

15. Cont.
Profit- income received for entrepreneurial skills and risk taking, calculated by subtracting all of a firm’s explicit and implicit costs from its total revenues.

16. Question: What is the incentive for sellers when pricing goods? Profit
Increasing sales
Developing customer loyalty

17. worksheet Match the Chevrolet model to the estimated retail price
Compare the price of the Chevrolet Camaro to the convertible model.
What do you think the differences are between the two Camaro vehicle models that led to a $40,000 difference in price?

18. Question?
What are some incentives for a person choosing to purchase a luxury vehicle?
Improved social status
Attention to the driver
High performance vehicle
Moving you from point A to point B faster
Increased safety
The interior

19. Think of a product that you might purchase…… Dallas Cowboy tickets
What would be your purchase price (green light)
What would be your caution price (yellow light)
What would be the price you are not willing to pay (red light)

20. It is difficult for businesses to price their products.
Profit margin – the difference between the selling price and the costs to make the sale.
This is the way a business makes money and survives
Significant role because profit drives growth.
Have to take into account competitor’s prices and signals that your prices will send customers.

21. Buyer incentives
Give me a show of hands if you would be willing to purchase the following items at these price points:
Coke: $.50
Movie tickets: $1.00
Tropical vacation: $25.00
Car: $100.00

22. Cont. Now, what if the prices increased? Coke: $3.00
Movie tickets: $13.00
Tropical vacation: $1,000
Car: $ 25,000
Look at the change of interest when the price increases.

23. Incentives for businesses and consumers
Find four different hotels to stay in Los Angeles, California for a given night using the price points below
Use any travel website (Orbitz, Travelocity)
Less than $99.99 per night (not including taxes)
$100. to $199 per night (not including taxes)
$200 to $299 per night
$300 or more per night
For each hotel identify at least 3 incentives for both the business and the consumer for that price and particular night.

24. How are prices determined?
The interaction of consumers and producers.
The interaction of supply and demand.

25. Remember!
There is an indirect relationship between price and quantity demanded with a demand curve. (downward slope)
A supply curve shows a direct relationship between price and quantity supplied. (upward slope)

26. Questions: Is it supply or demand that determines price? They both do
What is the point where the supply curve and the demand curve intersect called?
Market equilibrium
What does equilibrium mean?
Balance, stability

27. Questions cont. What does this point represent?
The market clearing or equilibrium price. The price at which the quantity supplied equals the quantity demanded.

29. When the quantity supplied is greater than the quantity demanded, there is a surplus.
If the quantity demanded exceeds the quantity supplied, there is a shortage.
What do you think will happen that will move the market toward equilibrium, eliminate surplus.
To sell more of the product, producers will reduce the price. At the lower price consumers will be willing and able to buy more. This process will continue until the market clears…..reaches equilibrium.