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Supply Practice Problems
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Market Equilibrium! So how do we actually know what the price of something will be?
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Market Equilibrium Demand: What people are willing and able to buy at different prices Supply: What people are willing and able to sell at different prices Put them together…
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The Magic Point: Market Equilibrium
Market Equilibrium: The price and quantity (amount) that will exist in a market
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The Magic Point: Market Equilibrium
Exists where Supply = Demand
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Practice: Draw the market for shoes
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What if the price is lower?
Shortage: Good is cheap so lots of people want it There is not enough to satisfy the quantity demanded!
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What if the price is higher?
Surplus: Good is expensive so fewer people want it There is too much quantity supplied
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How does the Market Equilibrium Change?
Supply or Demand has to change (shift)
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Market Equilibrium in Action #1
Show me the market for Chick-fil-a. Label the Equilibrium point, price, and quantity.
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Market Equilibrium in Action #1
Now imagine that a new report comes out saying that eating Chick-fil-a gives you the ability to fly. What happens to supply? What happens to demand?
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Market Equilibrium in Action #1
Find the new equilibrium point, price, and quantity. Did the price of Chick-fil-a change? How? Did the quantity of Chick-fil-a change? How?
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Another Example (on your own) #2
Draw the market for headphones. Label the original equilibrium price and quantity. Tell me what happens to equilibrium price and quantity of headphones when your income goes up. Use a graph to show me.
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One last example #3 Draw the market for pumpkins. Label the original equilibrium price and quantity. Tell me what happens to equilibrium price and quantity of pumpkins when a disease kills half of the pumpkins. Use a graph to show me.
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The Pearl Market
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