1. (Combining Supply and Demand) E.12,16,18,20
Equilibrium
(Combining Supply and Demand)
E.12,16,18,20

2. Objectives Students will…
Explain how supply and demand create balance in markets
Compare markets in equilibrium and disequilibrium
Explain how markets react to shifts in supply or demand to a new equilibrium

3. Fish Market Game
Every day, just before dawn, at fish markets around the world, fishermen haggle over prices with restaurant owners. These are remarkable and chaotic spectacles. The most remarkable thing about it, however, may be that just about every buyer finds a willing seller and vice versa. This is because the price of each type of fish quickly converges to an equilibrium point where quantity supplied equals quantity demanded. In order to see how this happens, the classroom has been turned into a fish market. Part of the class are fishermen (sellers), who want to make money from their morning catch. The other part of the class are restaurant managers (buyers), who seek to provide quality and diversity to their restaurant’s menu for the day. Both buyers and sellers are trying to maximize their profits. Prizes will be given out for achieving each of the following.
1) Buyers with a profit of at least $20.
2) Sellers with a profit of at least $20.
3) Buyer who can achieve the widest variety of seafood (and still have a profit).
4) Seller with the least leftover product (and still have a profit).

4. Instructions - Three 5-minute Rounds
The class has been divided into buyers and sellers. (Each seller has been assigned one type of seafood.)
There are several different types of seafood available for purchase. Each buyer wants no more than 1 of each
Each buyer and seller have been given a BUYER card or SELLER card at a time. The exact price will be written on each card. DO NOT REVEAL THIS PRICE TO ANYONE.
If you are a buyer, you want to purchase the seafood for less than the price on the card.
If you are a seller, you want to sell the seafood for more than the price on the card.
When you get your card, immediately write down the price in the “Price on Card” column in “Your Transactions” table. (rounded to nearest dollar amount)
When a price is agreed upon, the seller should give the buyer one of their Seafood Cards.
Then, record transaction on the “Price in Transaction” column and compute profit in the “Gain or Loss” column.
Then get a new Buyer Card or Seller Card and start over.
Seller will be responsible for reporting transaction to Miss Tyler; prices will be tallied on board.

5. A Fish Market
You will need to get out of “View Slideshow” mode in order to enter data onto this table. Double click the image to open the Microsoft Excel worksheet object. Once open, enter data directly into the blank column. This will cause the final two columns to populate with data. Click on the tab entitled “Graph” to see the data drawn onto a graph. (Sometimes Excel chops off part of the graph for some reason. If this happens, just exit out of the spreadsheet and then double-click the image from PowerPoint again. The graph will be whole again and you will not lose any of the data you entered into the spreadsheet!) If for some reason you cannot get this to work, simply open the full Excel document that was included in the download, entitled “Tally Sheet and Graph.” You can project the image of the actual Excel spreadsheet in this way.

6. After the final round…
Calculate Totals and Profits on the “Your Transactions” table
Bonus points for …
1) Buyers with a profit of at least $20.
2) Sellers with a profit of at least $20.
3) Buyer who can achieve the widest variety of seafood (and still have a profit).
4) Seller with the least leftover product (and still have a profit).
Copy the data from the board onto the “Class Data” Table. [Total Supply and Total Demand columns are cumulative.]
Plot the “Class Data” on the graph provided. (Need to write in the quantity values.

7. Equilibrium
The point where demand & supply are equal – point of balance between price and quantity.
When a market is at equilibrium, it is stable
To find equilibrium – price where #D = #S
“Market-clearing price”
At this price, buyers will purchase exactly as much of the product as firms are willing to sell.
Buyers who are willing to purchase the goods at E will find ample supplies on store shelves.
Firms that are willing to sell at E will find enough buyers for their goods.
Competitive markets move toward equilibrium due to competition and availability of information.

8. Disequilibrium
Any price or quantity not at equilibrium; when #S is not equal to #D in a market.
Any other price besides $1.00 per pound and any quantity other than 10 billion pounds.
Disequilibrium can produce one of two outcomes: excess demand or excess supply.

9. Excess Supply (Surplus)
When #S is more than #D; price is too high
After a short time, suppliers will get tired of throwing out unsold goods and will cut their prices
As price falls, #D rises
If producers lower their prices, they are more willing to sell, and more consumers will be willing to buy
Whenever the market is in disequilibrium and prices are flexible, market forces will push the market toward E.

10. Excess Demand (Shortage)
Occurs when #Demanded is more than #Supplied (price too low)
With so many buyers, sellers will realize they can make more money by increasing the price.
When the actual price in a market is below E, you have excess demand
As long as there is excess demand, the #D exceeds the #S, suppliers will keep raising the price. When price has risen enough to close gap, suppliers has found the highest price that the market will bear. They will continue to sell at that price until something changes the supply or demand curve & creates new pressures to lower or raise prices & (eventually) a new E.

11. Changes in Market Equilibrium
Assuming that a market starts at E, there are 2 factors that can push it into DE: a shift in the entire demand curve and a shift in the entire supply curve.

12. When demand changes…
When demand increases, it will almost always be true that
Price increases
Quantity increases

13. When demand changes…
When demand decreases, it will almost always be true that
Price decreases
Quantity decreases

14. When supply changes…
When supply increases, it will almost always be true that…
Price decreases
Quantity increases

15. When supply changes…
When supply decreases, it will almost always be true that…
Price increases
Quantity decreases

16. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?
Point out on the graph how quantity has definitely increased, but price is unknown. The animation will illustrate why price is unknown. Allow students time to copy down the graph.

17. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

18. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

19. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

20. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

21. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

22. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
Why Is Price Unknown?

23. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?
Point out on the graph how quantity has definitely decreased, but price is unknown. The animation will illustrate why price is unknown. Allow students time to copy down the graph.

24. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

25. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

26. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

27. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

28. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

29. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
Why Is Price Unknown?

30. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Point out on the graph how price has definitely increased, but quantity is unknown. The animation will illustrate why quantity is unknown. Allow students time to copy down the graph.
Why Is Quantity Unknown?

31. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

32. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

33. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

34. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

35. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

36. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Why Is Quantity Unknown?

37. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
Point out on the graph how price has definitely decreased, but quantity is unknown. The animation will illustrate why quantity is unknown. Allow students time to copy down the graph.
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

38. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

39. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

40. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

41. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

42. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

43. When Demand & Supply Change
1) Demand increases and supply increases
a) Price is unknown
b) Quantity increases
2) Demand decreases and supply decreases
a) Price is unknown
b) Quantity decreases
3) Demand increases and supply decreases
a) Price increases
b) Quantity is unknown
4) Demand decreases and supply increases
a) Price decreases
b) Quantity is unknown
Why Is Quantity Unknown?

44. Grab a whiteboard, markers, erasers

45. Assessment
A market is said to be in equilibrium when
There are an equal number of buyers and sellers
Both demand and supply have stopped changing
The quantity demanded equals the quantity supplied
No new firms are entering the industry.
In a market economy, equilibrium is determined
Through the interaction of buyers and sellers
When the government sets a stable price
By the buyers
By the sellers
3. When regular market forces are at work, prices below equilibrium will be
Bid down due to competition between buyers
Bid down due to competition between sellers
Bid up due to competition between buyers
Bid up due to competition between sellers
4. When demand decreases, what will happen to the equilibrium price and quantity?
Price increases, quantity increases
Price decreases, quantity decreases
Price increases, quantity decreases
Price decreases, quantity increases
Supply decreases? Increases?
Demand increases?

46. EXIT TICKET
Newspaper Headlines Each story illustrates a change in supply, demand, or both. For each headline, determine which market is being described, decide how supply and/or demand is affected, and draw the change on the graph. After you draw the graph, determine how price and quantity have been affected.
EXPERTS: $4 A GALLON GAS COMING SOON
BARNES & NOBLE’S NOOK FLOPS DURING HOLIDAYS
BEARING THE COMING WATER SHORTAGE
EPA STUDY SUPPORTS MORE NATURAL GAS

47. EQUILIBRIUM PRACTICE
Finish for homework if not finished in class.