1. Chapter 6 Prices
More real world situations

2. Prices Bring Markets to Balance
Market Price: price that willing consumers pay to a willing producer for the sale of a good or service.
Market Price is found by:
looking at consumer and producer interactions.
Consumers send signals to producers:
about whether a product is priced too high or too low.

3. What Happens When the Price isn’t “Right”?
Disequilibrium: Formed when market price is set above or below the equilibrium price
Leads to excess demand
or to excess supply
Excess Supply – Supply exceeds demand, Price is too high
Excess Demand – Demand exceeds supply, Price too low
$15.00
Equilibrium
Ex) $ 10.00
$5.00

4. Excess Demand ---> Shortages
To get back to equilibrium, price would need to rise

5. Excess Supply ---> Surplus
Excess surplus
To get back to equilibrium, price would need to go down
insert think pair share slide before this

6. How Price is Affected by Demand Shift
New market

7. How Price is Affected by Supply Shift

8. What do the Shifts Tell Us?
What do you think the shifts tell us (Hint: There’s 3 things)
jot down your thoughts

9. What do the Shifts Tell Us?
Changes in prices….
Tells producers how much to produce
Tells producers how much to charge
Shows buyer’s interest (demand) for a product
Prices give incentives---> encourages producers to produce more to make a profit
Allows markets to adjust to changing conditions
Able to respond to global issues
able to use resources efficiently

10. Think-Pair-Share
When the government decides that prices are too high or too low,
it gets involved in 2 ways.
What do you think those ways are?
Try and think of real world examples if you can.

11. What Happens when the Government is Involved?
Government affects prices in 2 ways:
Price Ceilings: setting a MAX price
Price Floor: setting a MINIMUM price
It can be difficult to stop government interference due to political influences from those who it benefits
Price Ceilings and Floors- Economics 2.6
Max. Price
Min. Price

12. What Happens when the Government (federal, state, or local) is Involved?
What are some examples of Price Ceilings?
________________________________________________________
What are some examples of Price floors?
Max. Price
Min. Price

13. How to you Determine a shortage or surplus?
Shortage=Quantity Demanded - Quantity Supplied
QD - QS
Surplus=quantity supplied – quantity demanded
Qs - QD

14. Black Markets
Black markets: an illegal market where goods are traded at prices or quantities higher than those set by law.
They are usually created in response to government controls that can create shortages or surpluses