1. Increases and Decrease in Demand
Higher demand leads to higher equilibrium price and higher equilibrium quantity supplied
Lower demand leads to lower equilibrium price and lower equilibrium quantity supplied

2. Increases and Decreases in Supply
Higher supply leads to lower equilibrium price and higher equilibrium quantity demanded
Lower supply leads to higher equilibrium price and lower equilibrium quantity demanded

3. Supply and Demand Model Practice
Answer the following on a separate sheet of paper
Suppose we are analyzing the market for hot chocolate.
Winter starts and the weather turns sharply colder, consumers prefer hot chocolate.
The price of cocoa beans, an ingredient in making hot chocolate, decreases.
The Surgeon General of the United States announces that hot chocolate causes acne.
Protesting farmers stop producing millions of gallons of milk, causing the price of milk, an ingredient in hot chocolate to rise. S D

4. Activator Chapter 6
Plot the schedule below, which represents the demand for water after a hurricane.
3.00
4.00
5.00
2.00
1.00
Price QD QS $6 60 5 10 50 4 20 40 3 30 2 1 S
6.00
Price Ceiling D

5. Price Ceilings
Price Ceiling – government imposed, legal maximum price that can be legally charged for a good/service
New York introduced rent control in the early 1940s as a way to provide affordable housing
Price ceiling causes a shortage in the amount of the product

6. Input Costs $7.25 x 40 hours = $290 $290 x 4 weeks = $1160
$1160 x 5 workers = $5800
$5800 x 12 months = $69,600
$9.00 x 40 hours = $360
$360 x 4 weeks = $1440
$1160 x 5 workers = $7200
$5800 x 12 months = $86,400

7. Activator Chapter 6
Plot the schedule below, which represents the demand for laborers in the market.
4.25
5.25
6.25
2.25
1.25
Price QD QS
$7.25 60
6.25 10 50
5.25 20 40
4.25 30
2.25 1
Price Floor S
7.25 D

8. Price Floor
Price Floor – government imposed, legal minimum price at which a good can be sold
Minimum wage is a well-known price floor
Minimum wage can cause a surplus of workers

10. Price ceilings Equilibrium Price ceiling Quantity Price 2 200 800 100
1 April 2017
Price ceilings
Equilibrium
Price ceiling D
Quantity
Price 3 2
200
800 4 S
100 D
Quantity
Price 3 2
200 4 S
100
Price Ceiling
Shortage
800

11. Price Ceilings in Apartments
1 April 2017
Price Ceilings in Apartments

13. Price controls: price floors
1 April 2017
Price controls: price floors
Equilibrium
Price floor D
Quantity of icecreams
Price 3 2
200 4 S
100 D
Quantity of icecreams
Price 3 2
200
600 4 S
100
Surplus
Price Floor
600

14. 1 April 2017

15. Minimum Wage Videos Stossel 2012 (dvd)

16. Application – Price Ceiling
Price of
Ice
Cream
Cones
Scenario: the government places a price ceiling on ice cream cones as a result of complaints and lobbying from the Ice-Cream Eaters of America. The price ceiling is at $2.00 a cone. Graph the following schedule based on the price points and qs/qd.
Supply
Demand
Equilibrium
point $3
Price ceiling 2
Shortage
of 50 cones
Price of Ice Cream Cones
Quantity Demanded
Quantity Supplied $3
100 2
125 75
Quantity
supplied
Quantity
demanded
Quantity of Ice-Cream Cones
125
The government imposes a price ceiling of $2. Because the price ceiling is below the equilibrium price of $3, the market price equals $2. At this price, 125 cones are demanded and only 75 are supplied, so there is a shortage of 50 cones.

17. Application – Price Floor
Price of
Ice
Cream
Cones
Surplus of 40 ce Cream Cones
Scenario: the government places a price floor on ice cream cones as a result of complaints and lobbying from the National Organization of Ice-Cream Makers. The price floor is at $4.00 a cone. Graph the following schedule based on the price points and qs/qd.
Supply
Demand
Price floor $4 3
Equilibrium
point
Price of Ice Cream Cones
Quantity Demanded
Quantity Supplied $4 80
120 3
100
Quantity
supplied
Quantity
demanded
Quantity of Ice-Cream Cones
120
The government imposes a price floor of $4, which is above the equilibrium price of $3. Therefore, the market price equals $4. Because 120 cones are supplied at this price and only 80 are demanded, there is a surplus of 40 cones.

18. A store sells cheddar cheese by the pound
A store sells cheddar cheese by the pound. The schedule reflects the quantity demanded and the quantity supplied for the different prices the cheese could be sold. $6 5 4 3
Answer the following question:
What is the market price? _________
What is the quantity demanded at the market price? _______
What is the quantity supplied at the market price? _________
On your graph, draw a line across your graph at the price of $4.00.
If the government were to set a price no higher than $4.00, this would be called a __________________________
Use your answer in (a) to label the line on your graph at the price of $4.00.
At a price of $4.00, the quantity demanded would be __________
At a price of $4.00, the quantity supplied would be __________
Is there a surplus or shortage of cheese? _____________
On your graph, draw a line across your graph at the price of $5.50.
If the government were to set a price no lower than $5.50, this would be called a _________________
Use your answer in (a) to label the line on your graph at the price of $5.50.
At a price of $5.50, the quantity demanded would be _____________
At a price of $5.50, the quantity supplied would be _____________
Is there a surplus or shortage of cheese? _____________________
4.50
280 2
280 1
price ceiling
300
240
shortage
price floor
240
360
surplus

19. Teacher Pay and Price Ceilings

20. Non-Binding Price Ceiling
Non- Binding Price Ceiling – price ceiling is above equilibrium and thus has no effect on the equilibrium

21. Non-Binding Price Floor
Non- Binding Price Floor – price floor is below equilibrium and thus has no effect on the equilibrium

22. Activator – Chapter 5 Elasticity and its Application
List an item that you would buy less of if the price increased
List an item that you would buy more of if the price decreased
List an item that you would continue to buy, even if the increased

23. Elasticity
Elasticity – measure of the responsiveness of quantity demanded or quantity supplied to a change in price
Price elasticity of demand – measures how consumers will cut back or increase their quantity demanded for a product when prices rise or fall
Measures the extent to which changes in price causes changes in quantity demanded.
Helps determine how much a price change will influence the qd of any given product

24. Elastic Demand
Elastic – quantity demanded changes drastically when a price rises or falls
A consumer is very responsive to price changes

25. Inelastic Demand
Inelastic - changes in price cause a relatively small change in quantity demanded
Consumers continue to purchase regardless of a price change

26. Slope of the Curve P P P2 P2 P1 P1 D D QD QD

27. Elastic Demand Curve P
80,000
40,000
10,000 D 10 QD
100

28. Inelastic Demand CurveP
$3.00
1.50
.50 D QD

29. Determinants of Demand Elasticity
Availability of Close Substitutes
Pepsi/Coke, Butter/Margarine
Necessities versus Luxuries
Medicine versus a luxury automobile
3. Definition of the Market
Food – broad category (inelastic)
Ice Cream – narrower (more elastic)
Vanilla Ice Cream – very narrow category (very elastic)
4. Time Horizon
Longer time horizon – more elastic
Gas in the short run is inelastic, but over time elastic

30. Elastic Supply
Elastic – suppliers can easily increase or decrease their quantity supplied in the short run

31. Inelastic Supply
Inelastic – suppliers have difficulty changing the quantity supplied

32. Elastic Supply Curve P S 10 1 5 20 QS

33. Inelastic Supply Curve
$3.00
1.50
.50 D QD

34. Elasticity of Supply S D3 D2 D1 Price per painting P3 P2 P1 1
Quantity of paintings

35. Elasticity of Supply S D3 D2 D1 Price per ticket $1000 $500 $100
Quantity of seats
80,000

36. Computing the Price Elasticity of Demand
Price elasticity of demand = Percentage change in quantity demanded
Percentage change in price
Value is less than 1, it is considered inelastic.
Inelastic – Demand is < 1
Value is greater than one, demand is elastic.
Elastic – Demand is > than 1
Value is equal to one, demand is unitary elastic.
Unitary Elastic – Demand is = 1
Value is equal to 0, demand is perfectly inelastic.
Perfectly Inelastic – Demand is = 0
Value is equal to infinity, demand is perfectly elastic
Perfectly Elastic – Demand is = infinity

37. Computing the Price Elasticity of Demand
Price elasticity of demand = Percentage change in quantity demanded
Percentage change in price
Percentage Change in QD – 25%
Percentage Change in Price – 15%
Percentage Change in QD – 10%
Percentage Change in QD – 15%
.25_
.15
= 1.67
Elastic
.10_
.15
= .67
Inelastic
.15_
.15
= 1
Unitary Elastic

38. Application – Elasticity of Ice Cream Cones The Midpoint Method
(Q2 – Q1) / [(Q2+Q1) / 2] (P2 – P1) / [(P2 + P1) / 2]
Price Elasticity =
Price
3.00
5.00
6.00
$7.00
2.00
1.00
Quantity Demanded of Ice-Cream Cones per week
(Q2 – Q1) / [(Q2+Q1) / 2]
_10___ 15
= .67
Horizontal is more elastic
“E”
$1___
$3.5
= .29
(P2 – P1) / [(P2 + P1) / 2]
= 2.3
.67_
.29
% change in qd
% change in price
4.00
Elastic

39. The Midpoint Method
(Q2 – Q1) / [(Q2+Q1) / 2] (P2 – P1) / [(P2 + P1) / 2]
Price Elasticity =
Price
8.00
$10.00
8 10
Quantity A
10 – 8_ 9
= .22
$10 – 8_ $9
= .22
B A B
22%
= 1
Unitary Elastic
A B
10 – 8__ 9
= .22
$10 – 8 9
= .22
.22
= 1
Unitary Elastic

40. Application – Elasticity of Table Salt
(Q2 – Q1) / [(Q2+Q1) / 2] (P2 – P1) / [(P2 + P1) / 2]
Price Elasticity =
Price
3.00
5.00
6.00
$7.00
2.00
1.00
Quantity Demanded of Table Salt
5 ___
12.5
= .40
(Q2 – Q1) / [(Q2+Q1) / 2]
Vertical is more elastic
“I”
$4___ $4
= 1
(P2 – P1) / [(P2 + P1) / 2]
= .4
% change in qd
% change in price
4.00
Inelastic

41. Elasticity Application 1
(Q2 – Q1) / [(Q2+Q1) / 2] (P2 – P1) / [(P2 + P1) / 2]
Use the formula to show how you determine elasticity of demand for the graph.
Q2 _______ - Q1_______ = ______ / Q2 ______+ Q1 _______ / 2 = _______ = ________
P2 _______ - P1_______ = ______ / P2 ______+ P1 _______ / 2 = _______ = ________
- Elasticity QD______ /______P = ________
Did the price change cause an elastic or inelastic response in the QD for ice cream cones? ________________________________________________
.67 20 10 10 20 10 15 5 3 2 5 3 4
.50
1.34
Elastic

42. Elasticity Application 2
(Q2 – Q1) / [(Q2+Q1) / 2] (P2 – P1) / [(P2 + P1) / 2]
Use the formula to show how you determine elasticity of demand for the graph.
Q2 _______ - Q1_______ = ______ / Q2 ______+ Q1 _______ / 2 = _______ = ________
P2 _______ - P1_______ = ______ / P2 ______+ P1 _______ / 2 = _______ = ________
- Elasticity QD______ /______P = ________
Did the price change cause an elastic or inelastic response in the QD for insulin? ________________________________________________
Inelastic

43. Price of a slice of pizza
Total Revenue
Total Revenue – the total amount paid by buyers and received by sellers of a good; total amount of money generated by the firm through sales
Price of the goods x quantity demanded = Total Revenue
Price of a slice of pizza
Quantity Demanded
Per day
Total Revenue
$.50
300
150
$1.00
250
$1.50
200
$2.00
135
270
$2.50
100
$3.00 50

44. Elasticity Application 3
Scenario: The Apple store in St. John’s Mall made the decision to drop the price of their Ipod Nano from $150 to $125. As a result, the sale of Nano’s increased from 200 a week to Create a Demand Schedule and Curve based on the above information.
Price Per Ipod Nano
Price of Nanos
QD per week
150
125
150
125
200
250 QD
Use the formula to show how you determine elasticity of demand for the graph.
Q2 _______ - Q1_______ = ______ / Q2 ______+ Q1 _______ / 2 = _______ = ________
P2 _______ - P1_______ = ______ / P2 ______+ P1 _______ / 2 = _______ = ________
- Elasticity QD______ P______P = ________
Did the price change cause an elastic or inelastic response in the QD for Nanos? ________________________________________________
Elastic
Elastic
2. Did the price change cause an elastic or inelastic response in the QD for Nano’s? ___________________
3. If the firm drops their price by _________%, they will see an increase in sales of __________%
4. To determine if this is a good decision for the firm, calculate the total revenue of each price:
- Multiply the first price of the Nano by the first QD – $______ x _______ = ___________________
- Multiply the second price of the Nano by the second QD – $ ______ x _______ = __________________
5. Which price point generates the most total revenue? ______________________
$30,000
$31250
125

45. .18
What is the price elasticity of demand when the price changes from $1 to $2? _________ *Use the midpoint method formula to determine the answer to #1*
Q2 – Q1__ ________ (Q2 + Q1)/ = ________________ = ___________ P2 – P1__ ________ (P2 + P1)/2 20
170
.12 1
.67
1.5
Based on the above result, demand for Moonbucks coffee at this price range is (elastic/unit elastic/inelastic)

46. 1.22
What is the price elasticity of demand when the price changes from $5 to $6? _________ *Use the midpoint method formula to determine the answer to #1*
Q2 – Q1__ ________ (Q2 + Q1)/ = ________________ = ___________ P2 – P1__ ________ (P2 + P1)/2 20 90
.22 1
.18
5.5
Based on the above result, demand for Moonbucks coffee at this price range is (elastic/unit elastic/inelastic)

47. The Flaw in Point Elasticity of Demand Percentage Change from the Original
Elasticity = Percentage change in Quantity Demanded/Percentage change in Price
% Q % P
Price
8.00
$10.00
8 10
Quantity A
10 – 8 X 100 10
= .20
$8 – 10 X100 $8
= -.25
B A B
.20_
-.25
= -.8
Inelastic
A B
8 – X 100 8
= -.25
$10 – 8 X100
$10
= .20
-.25_
.20
= -1.25
Elastic

48. Due Wednesday Determinants of Supply Video Supply and Demand Practice
Supply and Demand Application
Supply and Demand Review
Tennis Ball Simulation
SQ3R Prices & Supply and Demand
Crossword Puzzle
Study Guide
Terms
Essential Questions
Standards Sheet & Test Corrections
Notes
Daily Tens

49. Due Wednesday Demand Curve Assignment Chapter 4 Application Worksheet
Supply and Demand Model Practice
Video supply and demand chart
Supply and demand review
Supply and Demand Application
Elasticity of demand
Daily tens
Notes (4-6)
Terms