1. Bell Ringer Pretend you are at a farmer’s market. Two farmers are selling strawberries. Farmer Fred is selling the strawberries for $2.25 a basket. Farmer Frank is selling the strawberries for $2.00 a basket. Which farmer would you expect to sell the most?

2. Principles of Our Market Economy Chapter 14, Section 1

3. By the end of today’s lesson, you should be able to: Explain the circular flow of economic activity. Explain the laws of supply and demand.

4. Free Enterprise U.S. economy is based on the principles of free enterprise. Free Enterprise is a Market System. In a Free Enterprise system, individuals compete to have their wants satisfied. Example: privately owned shops sell consumer goods

5. America’s economy depends on the circular flow of goods, services, labor & money

6. Circular Flow Model of a Market Economy (page 378) Producers need resources to create the goods. Producers need: 1. Land 2. Labor 3. Capital Producers are able to purchase these resources when individuals pay for the producers good or service.

7. Every Market Exchange Brings Together 2 Sides To summarize, individuals exchange their labor to earn money to buy goods and services. The businesses/producers depend on the money used to buy goods and services to provide them the funds needed to secure their needed resources of land, labor, and capital. When their workers (labor) are paid a wage, the employees use their wage to purchase goods and services. The cycle continues!!!

9. Law of Demand Demand: amount of a product or service that buyers are willing and able to buy at different prices. Law of Demand: Demand has an inverse relationship with price. When prices are low, demand will be high. When prices are high, demand will be low.

10. Law of Demand When prices are high, demand will be ________________? Low Price and Demand have an inverse or negative relationship.

11. Law of Supply Supply: the amount of a product that producers are willing and able to offer at different prices. Law of Supply: Supply has a positive relationship with price. When price is low, supply is low. When price is high, supply is high.

12. Law of Supply When are producers willing to supply more of a product? Why?

13. Supply & Demand The laws of supply and demand work together to determine the price of the product and the quantity offered. Market Price: price at which buyers and sellers agree to trade. Market Price is illustrated on a graph where the supply and demand curves intersect.

14. Analyze Graphs, Page 380 1. How will a decrease in price affect the supply of strawberries?  The supply will decrease. 2. At $2.00 a basket, how many baskets of strawberries could be sold and why?  600 baskets, because suppliers will not be motivated to sell many at such a low price. 3. What is the market price illustrated on this graph?  $3.00

15. Comprehension Check What are some examples of free enterprise.

16. Comprehension Check What resources do producers need to create goods and services in a circular flow of economic activity? Labor, Land, Capital

17. Comprehension Check What can individuals supply to businesses in a circular flow economy? Money (payment for goods and services) and Labor

18. Comprehension Check If more shoes are produced to sell at $30 a pair than when they were sold at $20 a pair, does this illustrate the law of supply or demand? Law of Supply Would the demand be greater for the shoes that are $20 a pair or the shoes that are $30 a pair? $20 a pair

19. Comprehension Check When prices go up, demand usually moves in what direction? Down

20. Comprehension Check What determines the market price? Laws of Supply and Demand

21. Assignment Analyze the diagram of the “Circular Flow Model of a Market Economy” and answer Questions A & B. This needs to be turned in before you leave the class.