Download If the price of good rises, what had to have occurred in the market

What happened
to supply?
If the price of good
rises, what had to
have occurred in
the market?
What happened
to demand?
What happened
to supply?
If the price of good
falls, what had to
have occurred in
the market?
What happened
to demand?
MORE PRACTICE!!! Shifting Supply and Demand
(Using S/D, explain the change in price. Note
both S/D will shift) –
1. Suppose the market for roses is currently at
equilibrium. If the supply of roses falls, while at
the same time the demand for roses rises, what
can you say about the price and quantity of roses
in the market?
2. The price of a round-trip ticket to Paris on Air
France falls by more than $200 after the end of
school vacation in Sept. This happens despite
the fact that generally worsening weather
increases the cost of operating flights to Paris,
and Air France therefore reduces the number of
flights at any given price.
50
S/D Shifts CONTINUED:
What is the effect on price and quantity?
Effect on Price
Demand increases
Demand decreases
Supply increase
Supply decreases
Demand decreases and
supply increases
Both supply and
demand decrease
Demand increases and
supply decreases
Both supply and
demand increase
Effect on Quantity
52
Simultaneous Shifts in S/D
53
S/D Shifts:
What is the effect on price and quantity?
Effect on Price
Effect on Quantity
Demand increases
Up
Up
Demand decreases
Down
Down
Supply increase
Down
Up
Up
Down
Down
Ambiguous
Ambiguous
Down
Up
Ambiguous
Ambiguous
Up
Supply decreases
Demand decreases and
supply increases
Both supply and demand
decrease
Demand increases and
supply decreases
Both supply and demand
increase
• Uber is a technology company that has developed a
software that allows anyone to request a ride via mobile
app, text message, or the web. Drivers arrive curbside in
just minutes, you can track the arrival of your ride, you'll
receive a text message when your driver arrives, the
credit card on file is charged after your ride, and you will
receive an email receipt detailing your trip.
• http://www.businessinsider.com/uber-newyears-eve-surge-pricing-2014-1
Dynamic Pricing – prices
reflect supply and demand
lower demand= low prices
demand > supply=
high prices (surge pricing)
•
•
http://www.businessinsider.com/uber-new-years-eve-surge-pricing-2014-1
http://www.npr.org/blogs/money/2014/01/24/265396928/when-a-65-cab-ride-costs-192
Graph supply and demand for
A. Uber during regular hours/day
B. Demand/Quantity Demanded
during a snow storm
C. Supply/Quantity Supplied during
surge pricing
D. After a Twitter rant
What happens to the price in each
scenario?
‘s Pricing Model
• Genius or death sentence?
• Do you think Uber’s pricing model is an effective
way to run a business? Explain.
• http://www.npr.org/blogs/money/2014/02/07/
273060341/episode-516-why-paying-192-for-a5-mile-car-ride-may-be-rational
• 22 minutes