Did you get the POP Quiz from yesterday? It is due

tomorrow!

Grab a highlighter and a red pen or pencil!!!

Economics & Economic Decision Making

Notebook Question:•What should happen to price if demand increases?

•What should happen to price if supply decreases?

What are prices? How are prices established?

• PRICE: The VALUE (in dollars) society places on G&S, and is established by PRODUCERS & CONSUMERS

Recopy this Chart into your notebook

PRICE QUANTITY DEMANDE

D

QUANTITY SUPPLIE

D

$30 0 13

$25 1 11

$20 3 9

$15 6 6

$10 10 3

$5 15 0

Graph both the supply and demand curves

• Vertical Axis: Go Up By 5s

• Horizontal Axis: Go Out By 3s

• Graph Demand (label with D)

• Graph Supply (label with S)

Bushels of OrangesPrice

in

Dollars

Quantity3 6 9 12 150

$5

10

15

20

25

30

D

S

“X” Marks the Spot

• EQUILIBRIUM: when a producer’s SUPPLY is EQUAL to a consumer’s DEMAND; both P and Q are the equal and the MARKET IS CLEARED.

Bushels of OrangesPrice

in

Dollars

Quantity3 6 9 12 150

$5

10

15

20

25

30

D

S

What is the equilibrium price and quantity of this market?

P = $15

Q = 6

Let’s continue with market graphs!!!

Warm Up Questions:

1. What is a market?

2. Who has power in the market?

What would happen if the producer set the price at $25?

At P = $25

• SURPLUS:

• the quantity supplied is GREATER than the quantity demanded at a given price

• (QS > QD)

• Low Demand + High Supply = Extra Product

Bushels of OrangesPrice

in

Dollars

Quantity3 6 9 12 150

$5

10

15

20

25

30

D

S

QS>QD = Surplus

11 – 1 = 10 extra

What would happen if the producer set price at $10?

At P = $10

• SHORTAGE:

• the quantity supplied is LESS than the quantity demanded at a given price.

• (QS < QD)

• High Demand + Low Supply = Not Enough Product!!

Bushels of OrangesPrice

in

Dollars

Quantity3 6 9 12 150

$5

10

15

20

25

30

D

S

QD>QS = Shortage

10 - 3 = 7 short

Drawing the Market

a MARKET must always have a firm’s SUPPLY and a household’s DEMAND

Price

Quantity

S1

D1

EQUILIBRIUM POINTP1

Q1

Coffee Market, Price @ $2.50

Price

Quantity of Coffee

S1

D1

$2.50

Q1

Market Scenarios:

• Orange Pickers Go On Strike, what will happen to the orange market?

• Which Curve is effected by this? Why?

• What should happen to price? Why

LET’S GRAPH IT!!

Orange Pickers go on Strike:

Price

Quantity

S1

D1

P1

Q1

S2

P2

Q2

If the workers are on strike…wouldn’t you expect prices to go up?...wouldn’t you also expect less oranges available?

Does the model show this?? YES!!!

Orange Pickers go on Strike:

Price

Quantity

S1

D1

P1

Q1

S2

P2

Q2

Now we can work on the WHY and HOW should you appropriately explain this

market scenario!!

______________ of oranges will ____________ due to __________________; therefore the __________curve shifts ______________, as a result PRICE will _____________

SUPPLY

DECREASEPRODUCTIVITY

LEFT

INCREASE!!

SUPPLY

Oranges are found to cure cancer.

• Which curve is effected?

• What should happen to price?

See if you can figure out what would happen in this market scenario!!

Orange Cure Cancer:

Price

Quantity

S1

D1

P1

Q1

P2

Q2

D2

______________ will ______________ due to __________________; therefore the curve shifts ________________, as a result PRICE will ________________

Demand

INCREASE

CONSUMER TASTES

RIGHT

INCREASE

DEMAND CHANGE RULES

If Supply is constant:

An increase in demand will ___________ price.

A decrease in demand will ___________ price.DECREASE

INCREASE

SUPPLY CHANGE RULES

If Demand is constant:

An increase in supply will ___________ price.

A decrease in supply will ___________ price.

DECREASE

INCREASE

GRAPHING TIP SHEET

• Here is a tip sheet for you:

• All new scenarios will start with this:

• And your sentence will look like this:

____________ will ____________ due to _____________; therefore the curve will shift __________. As a result, price will _____________.

Scenarios to think about:

• Due to poor managing, Pepsi is forced to raise all of its prices 50% to make up some of the losses. How will this affect the price of Coca-Cola?

• Demand will increase; due to substitutes, the curve will shift right; price will increase.

Scenarios to think about:

• The 3M Corporation installs all new assembly lines in their factories world-wide How will this affect the price of Post-It notes?

• Supply will increase, due to technology, the curve will shift right; price will decrease.

TOP TEN FUN!!!

10. Baby Ruth

9. 100 Grand

8. Chunky

7. 3 Musketeers

6. Hershey Bar

5. Milky Way

4. Butter Finger

3. Kit Kat

2. Twix

1. Snickers

Category: Best Selling Chocolate Bars

Not a Bar!!

Not a Bar!!