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 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?