Answer the following in 3-5 complete sentences: If there were a very popular toy that all the kids wanted around Christmas time, but not enough were made to meet the high demand, what would probably happen? How much would people likely pay? Why? Objective: Describe how price, supply, and demand interact. Shortage – When quantity demanded exceeds quantity supplied • Not enough supply to meet demand Surplus – When quantity supplied exceeds quantity demanded • An excess of goods Equilibrium – When quantity supplied equals quantity demanded At $3 a bunch, the seller can sell only bushels. This would lead to a surplus A Surplus now exists, as there will be excess goods left over At $4/bushel, the auctioneer can sell 30,000 bushels. This would lead to a shortage. A Shortage now exists, as there is not enough supply to meet demand. At $6/bushel, the auctioneer will sell 20,000 bushels. This creates an equilibrium. The Market is now in Equilibrium, as supply is equal to demand. The Equilibrium Quantity is 20,000 bushels and the Equilibrium Price is $6. Markets will usually lead themselves to equilibrium Sometimes, the government steps in and can set one of the following: • Price ceiling: maximum price that can be legally charged for a good • Price floor: minimum price that can be legally charged for a good Read the text with a partner 1. Create a flowchart that shows what happens when prices are set too low. 2. Create a flowchart that shows what happens when prices are set too high. 3. Why does the time it takes to reach equilibrium vary from market to market? Shifts in Demand T – Time I – Income P – Preferences S – Substitutes and compliments E - Expectations Shifts in Supply P – Productivity I – Inputs G – Government Regulations T – Taxes E – Expectations S – Subsidies T – Technology 1. 2. 3. 4. 5. What strategy did you use to make the most profit? What was your easiest transaction? Why was it easy? What was your most difficult transaction? Why was it difficult? Did buyers or sellers determine the price for wheat? Did competition among sellers and buyers influence price? Why or why not?