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For classwork credit: Create shifts There are ten total shifts (5 supply and 5 demand). Come up with a scenario for each. Bellringer Review Questions Check in: Supply and Demand together graph Agenda Notes: Supply and Demand together Midterm Thursday and Friday Identify the determinants of demand BITER Review Questions Identify the determinants of supply RENTS When more is produced than is demanded, what is the result? Surplus When less is produced than is demanded, what is the result? Shortage Supply and Demand Together Graphs How did it go? Are we finished? Need more time? Supply and Demand Together Objective Students will draw supply and demand curves and be able to identify equilibrium, surplus, shortage, and illustrate appropriate determinant shifts In market and mixed economies, supply and demand work together to help the economy self-regulate Supply and Demand Adam Smith called this phenomenon the “Invisible Hand” Supply and demand work together to determine prices and prices are the basis of most economic decisions Supply and Demand Schedule Graphing Supply and Demand Same rules apply for when you graphed them separately. They make an “X” Graphing Supply and Demand “Mind your P’s and Q’s” (P(rice) on vertical axis, Q(uantity) on horizontal) Demand is always downward sloping, Supply is always upward sloping Always label supply curve (s) and demand curve (d). Search and destroy! Graphing Supply and Demand Surplus: when there is more of an item supplied than is demanded. You have “extra” Working Together Signal that price is too high – people don’t want to buy it How do you alleviate a surplus? Drop the price! Surplus Surplus Shortage: quantity demanded is more than what is supplied. There is not enough to go around Shortage Signals that prices are too low! Everyone is buying! Solution: Raise the price Surplus Shortage When operating without any restrictions (Laissez-Faire) our market economy will self regulate Add it all up… This means shortages and surpluses are automatically sorted out by price restructuring – the result is a perfectly balanced market/mixed economy When an economy reaches equilibrium – it will stay there until either supply or demand shifts Equilibrium Equilibrium: The price at which supply and demand meet Equilibrium Equilibrium Draw a standard supply and demand curve (be sure to label) Check for Understanding Label surplus Label shortage Label equilibrium When given a scenario ask yourself “Does this affect supply or demand?” Remember all of your determinants Shifting Together… Example: if a scenario is about technology, obvi it is a supply shift Trickiest shifts: expectations! Must think of it from either a consumer or producer standpoint. After you have determined which line will shift (supply or demand), using labels to identify which direction it will go Shifting Together… Write the determinant that is at work If applicable – identify the new equilibrium price Visual Price 1. The income of the Chapel Hill townies declines after an early loss during March Madness. S P1 P2 D D1 Q2 Q1 Quantity Price 2. Chapel Hill is named one of the most beautiful towns in North Carolina and tourism doubles S P2 P1 D1 D Q1 Q2 Quantity Price 3. The price of blue ties decreases. How does this affect demand for purple ties? (Blue P1 ties are a substitute good P 2 for purple ties) S D1 Q2 Q1 D Quantity Price 4. The Federal government has been warning the public about the possibility of a recession and job loss in the RDU area. S P1 P2 D1 Q2 Q1 D Quantity The price of silk increases (ties are made with silk). Price S1 S P2 P1 D Q2 Q1 Quantity Price S The government adds a subsidy to tie production. S1 P1 P2 D Q1 Q2 Quantity Price Purple ties are named by GQ magazine as a “must have” for all young professionals. At the same time, a new textile machine decreases the cost of producing purple ties. S S1 P1 D1 D Q1 Q2 Quantity Practice Complete the worksheet