the market never stands still. 1. according to the schedule and the graph, what is the equilibrium...
TRANSCRIPT
The Market Never Stands Still
Bell ringer, 9.15
1. According to the schedule and the graph, what is the equilibrium price and quantity demanded in this example?
2. Priced at $19, what is the surplus / shortage?
3. If there is a shortage of -800, then what was the price of the DVDs?
Please write down the three questions below. Use the chart on page 195 to answer. Thanks.
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. c. Define price elasticity of demand and supply.
Today’s Objective:
How can changes in supply and demand be illustrated?
Today’s Essential Question:
Determinants of Demand
• Change in consumer income
• Change in tastes and preferences
• Change in the price of a substitute good
• Change in the price of a complementary good
• Change in consumers’ price expectations
• Change in number of consumers in the market
Shifts in Demand D
em
an
d
pri
ce
Quantity of pecans per day
10 20 30 40 50 60 70 800.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
D1
A B
C D
E F
D2
Determinants of Demand(Things that shift the entire line!)
•R
•I
•P•E•N
elated goods (Complements and Substitutes)
ncome –
references –
xpectations –
umber of buyers –
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R
•I•P•E•N
elated goods (Complements and Substitutes)Complements: if price of complement increases, demand for the other good decreases; if price of the complement decreases, demand for the other good increases
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R
•I•P•E•N
elated goods (Complements and Substitutes)Complements: if price of complement increases, demand for the other good decreases; if price of the complement decreases, demand for the other good increasesSubstitutes: if price of substitute increases, demand for other good increases; if price of substitute decreases, demand for other good decreases
Related goods (Complements and Substitutes)
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R
•I
•P•E•N
ncome – income increases, demand increases; income decreases, demand decreases
Income – income increases, demand increases; income decreases, demand decreases
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R
•I
•P
•E•N
references – preferences increase, demand increases; preferences decrease, demand decreases
Preferences – preferences increase, demand increases; preferences decrease, demand decreases
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R
•I
•P•E
•N
xpectations – expect higher prices in future, current demand increases expect lower prices in future, current demand decreases
Expectations – expect higher prices in future, current demand increases expect lower prices in future, current demand decreases
Determinants of Demand (from Cannon)(Things that shift the entire line!)
•R •I
•P•E•N umber of buyers – # of buyers increase, demand
increases; # of buyers decrease, demand decreases
The demand for a particular good may increase or decrease due to more or less people in the market for the good. For example, before the advent of ecommerce (using the world wide web to buy and sell), most businesses sold products to people who lived in their area of the country or who ordered products from their mail order catalogs. As people began to use online shopping in greater numbers, many businesses with little or no web presence probably experienced a decline in consumers of their products due to increased competition from online businesses while businesses who quickly and effectively adapted to the ecommerce model probably saw an increase in consumers of their products.
Number of buyers – # of buyers increase, demand increases; # of buyers decrease, demand decreases
IRDL the Turtle!!!!
Increase Right, Decrease Left
Pecan Article
• http://online.wsj.com/news/articles/SB10001424052748704076804576180774248237738
Pecan statements
1. Lunar New Year, Chinese love Pecans on New year2. Corn syrup, used with pecans to make pecan pie, has risen in price3. Price of walnuts increases4. Household income increases in China5. Price of pecans drops6. US trade agreements allow for more pecans to be sold in more
countries7. Pecan prices expected to be higher next year8. Famous celebrities seen eating pecans at award ceremonies
Bell ringer, 9.15Exceptional4 points
Good 3 points
Average 2 points
Below Average1 point
Title and curve Title and curve also showing the change in supply or change in demand
Title and curve but does not show the
Title but no supply curve or demand curve
No title
Drawing A drawing that is an ample of a determinant that moves a supply curve or demand curve
No drawing No drawing No drawing
Explanation Clear and well written explanation of how determinant moves the curve
A well written explanation of how a determentant moves the curve
An unclear explantion of how the determinant moves the curve
No explanation
Color Colorful and creative with several colors
Two colors One color No color or attempt at artistic ability
How number of buyers affect the demand curve …
One determinant of demand is the number of buyers in the particular market. The number of buyers can push the curve to the right or to the left. For example, the number of people who left Detroit, Michigan means the demand curve for homes has shifted to the left. Conversely, in Arizona, the rise in population has led to the curve to move to the right.
Bell ringer, 9.16
Describe: (what do you see in the cartoon)
Infer: (What do you think the cartoon means)
Predict: (How do you think this cartoon might affect the supply curve (move right or left)
Describe. Infer. Predict.
Bell ringer, 9.16
Describe: (what do you see in the cartoon)
Infer: (What do you think the cartoon means)
Predict: (How do you think this cartoon might affect the demand curve (move right or left)
Describe. Infer. Predict.
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. c. Define price elasticity of demand and supply.
Today’s Objective:
How can changes in supply and demand be illustrated?
Today’s Essential Question:
Determinants of Demand(Things that shift the entire line!)
•R
•I
•P•E•N
elated goods (Complements and Substitutes)
ncome –
references –
xpectations –
umber of buyers –
Determinants of Supply(from lesson)
•Change in the cost of productive resources
•Change in technology
•Change in profit opportunities of producing other products
•Change in producers’ price expectations
•Change in number of sellers in the market
•Change in the government tax or subsidy
Shifts in Supply
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
overnment decisions
esource prices or availability
echnology or training
xpectations
umber of producers
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
overnment decisionsTAXES – taxes increase, supply decreases; taxes decrease, supply increases
Tax on Goods
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
overnment decisionsSUBSIDIES –subsidies increase, supply increases; subsidies decrease, supply decreases
Subsidies on Goods
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
overnment decisionsREGULATIONS – regulations increase, supply decreases; regulations decrease, supply increases
Regulations
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
esource prices or availability - •resource prices have an inverse relationship with supply•resource availability has a direct relationship with supply
When supply is limited, price is high
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
xpectations – expect to sell more, supply increases; expect to sell less, supply decreases; expect to sell at future higher prices, immediate supply decreases.
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
umber of producers – More suppliers leads to an increase in supply; less suppliers leads to a decrease in supply
Suppliers Enter the Market
Suppliers Exit the market
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T echnology or training – direct relationship to supply
Determinants of Supply (from Cannon)
•G
•R
•E
•N
•T
overnment decisionsTAXES – taxes increase, supply decreases; taxes decrease, supply increasesSUBSIDIES –subsidies increase, supply increases; subsidies decrease, supply decreasesREGULATIONS – regulations increase, supply decreases; regulations decrease, supply increases
esource prices or availability - •resource prices have an inverse relationship with supply•resource availability has a direct relationship with supply
echnology or training – direct relationship to supply
xpectations – expect to sell more, supply increases; expect to sell less, supply decreases; expect to sell at future higher prices, immediate supply decreases.
umber of producers – direct relationship to supply
Shifts in SupplyS
up
ply
p
rice
Quantity of pecans per day
10 20 30 40 50 60 70 800
0.5
1
1.5
2
2.5
3
3.5
4
S1 S2
A
B
C
DE
F
Bell ringer, 9.17Please write down the following Supply and Demand
Schedules; graph the supply and demand curve
Bell ringer, 9.18On the graph paper provided, identify and
label the following
Supply Curve and Demand Curve
the Equilibrium Point
Shortage and Surplus areas
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. c. Define price elasticity of demand and supply.
Today’s Objective:
Essential questionWhat are price ceilings and price floors?
Price Floors and Price Ceilings
Adam Smith felt that the government should never interfere in the free market …
Sadly, Adam Smith was a little bit off base, we need government to rein in free markets
Price FloorsAnd
Price Ceilings
Government price controls occur when a government decides to set a legal maximum or legal minimum price in a market for a good or service.
A price floor is a legal minimum price for a g, s, or fop Charging or paying a price below the price floor is illegal and can carry a penalty under the law.
The most familiar PF is the minimum wage. In the USA, it is illegal to pay less than $7.25 per hour. There are some classifications of workers who may not be subject to this requirement, but most are.
The government’s argument for a minimum wage stems from a belief that the market wage is not high enough to provide a reasonable standard of living for low skilled workers.
A price ceiling is a legal maximum price for a g, s, fop. Charging or paying a price above the price ceiling is illegal and can carry a penalty under the law.
The most familiar “PC” is the rent control. In some cities, the “ER” is viewed as too high for lower income people. Therefore, a city designates some housing units as rent control units.
Price ceilings usually create shortages in the market.
Price controls will often create underground markets. If the price floor minimum wage is truly too high for the market to bear, both workers and employers will choose to trade in the underground market. This is bad for government because it will not collect taxes on that income earned and it will have to spend resources to enforce the price floor. If the price ceiling rent is truly too low for the market, tenants will cheat by illegally subletting their rent controlled apartments to others, pocketing the difference. Landlords will have no incentive to keep apartments in good repair and the housing will become substandard. Eventually, the number of rent controlled units will decline as frustrated landlords convert their buildings to condominiums or sell off their property for alternative uses.
Bell ringer, 9.21Please write down the following demand schedule and
graph the demand curve
Bell ringer, 9.21Please answer the following 3 questions, you do not
have to write the question …
1.What is the difference in Quantity Demand if you move from $10 to $35?
2.What is the difference in Quantity Demand if you move from $45 to $15?
3.What is the difference in Price Demand if you from 40 stuffed animals to 70 stuffed animals?
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. c. Define price elasticity of demand and supply.
Today’s Objective:
Essential questionHow does elasticity explain the changes in demand and supply?
Price elasticity of demand refers to the responsiveness of consumers to changes in price.
Elasticity of Demand
Market “D” is inelastic when the % change in the price of a good is greater than the % change in quantity “D” of the good. For example, if a diabetic needs insulin in order to live, they are likely to purchase just as much even if the price rises significantly.
Elasticity of Demand
Market “D” is elastic when the % change in the price of a good is less than the % change in quantity “D" of the good. For example, if the price of snack you buy goes up, you will likely buy a much smaller quantity because you immediately substitute another snack for it since you have so many choices.
Elasticity of Demand
What does inelastic “D” look like? The first graph shows relatively inelastic “D” which means a price change on the “D” curve results in a very small change in quantity “D”. The second graph shows perfectly inelastic “D” which means a price change on the “D” curve results in no change in quantity demanded.
Elasticity of Demand
Relative Perfect
What does elastic “D” look like graphically? The first graph shows relatively elastic “D” which means a price change on the “D" curve results in a very large change in quantity “D”. The second graph shows perfectly elastic “D” which means any price increase or decrease no longer intersects the “D” curve and there is no quantity “D” at any other price.
Elasticity of Demand
Relative Perfect
Bell ringer, 9.22Please write down the following questions. Listen to the
podcast clip to answer … (17:00)
1.Why is Volkswagen in trouble with the United States government?
2.What is the maximum fine per vehicle that could be levied by the EPA against Volkswagen?
3.If the United States government cracks down on Volkswagen, will that shift the demand curve to the left or the right?
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. c. Define price elasticity of demand and supply.
Today’s Objective:
Essential questionHow does elasticity explain the changes in demand and supply?
Price elasticity of supply refers to the responsiveness of sellers to changes in price
Elasticity of Supply
Market supply is inelastic when the percentage change in the price of a good is greater than the percentage change in quantity demanded of the good…
Elasticity of Supply
Market supply is elastic when the percentage change in the price of a good is less than the percentage change in quantity demanded of the good. For example, if a company has a factory and it is currently operating at 70% of its capacity and the price of its product rises in the market, it can utilize some of its excess capacity quickly to take advantage of the higher prices.
Elasticity of Supply
What does inelastic supply look like graphically? The first graph shows relatively inelastic “S” which means a price change on the “S” curve results in a very small change in quantity “S”. The second graph shows perfectly inelastic “S” which means a price change on the “S” curve results in no change in quantity “S”.
Elasticity of Supply
Relatively InelasticPerfectly Inelastic
What does elastic supply look like graphically? The first graph shows relatively elastic “S” which means a price change on the “S” curve results in a very large change in quantity “S”. The second graph shows perfectly elastic “S” which means any price increase or decrease no longer intersects the “S” curve and there is no quantity “S” at prices higher or lower than the current price.
Elasticity of Supply