how supply & demand affects prices
DESCRIPTION
How Supply & Demand Affects Prices. What does it mean to be elastic?. Elastic. When the demand for a good changes in response to change in price. Example. $599.00 July 2007. $399.00 September 2007. $249.99 2010. $$$ Price. Demand. In elastic. - PowerPoint PPT PresentationTRANSCRIPT
How Supply & Demand Affects
Prices
What does it mean to be elastic?
ElasticWhen the demand for a good changes in response
to change in price.
Example
$599.00July 2007
$399.00September 2007
$249.992010
$$$ Price Demand
Inelastic
ElasticWhen the demand for a
good changes in response to change in price.
InelasticWhen the demand for a good …
With a partner try and come up with a definition for inelastic. Remember that we are referring to demand. Try and finish the sentence for inelastic.
does not change (or changes very little) in response to change in price.
$2.502007
$3.502010
With a partner decide if each example is elastic or inelastic.
#1 #2
#3 #4
Elastic or Inelastic
With a partner, come up with other examples of projects that are elastic or
inelastic.
Normal vs. Inferior Goods
Normal Goods
If your income increased what’s the first thing you
would you buy? Finish this sentence with a partner:I would buy a…..
Normal Goods
$249.99This is the projected price
for the next 3 years.
You really want this phone, but you don’t have the
money.
It’s Christmas time and everyone just received
$300 from family. What are you going to buy?
Demand for the phone increases, but the cost stays
the same.
What Does Inferior Mean?
Inferior Goods
Vs.
Vs.
Vs. What is an inferior good?
Normal & Inferior Goods
Normal
Turn to your shoulder buddy and make a list of normal vs. inferior examples.
Inferior Goods
Substitute or Complementary Goods
Substitution Good
$4.99$2.49
Which item would
you purchase?
Why?
If the cost of butter increases, the demand for margarine increases.
$3.75 $1.25
If the cost of coffee increases, the demand for tea increases.
Complementary Good
It’s July 4th and is having a sale on hot dog buns. What are you going to buy to go with the hot dog buns?
Summer 2010, there was a massive recall on peanut butter. People stopped buying peanut butter. What other complementary good would people have stopped buying?
Association Game