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!!