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Happy Block Day! Get out the following items: 1. Whatever notes you have, except for the yellow packets 2. A pen 3. A blank piece of binder paper 4. Two different color highlighters (markers will work in a pinch) HW reminder: by now, you should have filled out the google form. Around half of you have not, which means you need to do so immediately after this class. There will be two laptops set up in my room, and you should be able to do it on your phone. For Friday: print Unit 2 guided reading and note taking packet and bring to class. Read 5.3 pages 79-82 First off- Essential Understanding Quiz You will have 25 minutes to answer the following question • In a market economy, how does the circular flow of the economy address the problem of scarcity? • Hints: what does scarcity force us to do? • How does trade affect our economy? • Use the terms factor markets, product markets, households and businesses Self assessment • You are now going to mark your own response. As you edit: Highlight the areas in one color that address the proficient criteria. Highlight the areas in another color that address the advanced criteria. Scoring Rubric for EUQ #2 In a market economy, how does the circular flow of the economy address the problem of scarcity? ADVANCED (in one color) All of the Proficient criteria PLUS: □ identifies the role of trade in addressing scarcity PROFICIENT (in a different color) □ demonstrates how scarcity forces choices □ using the terms factor markets, product markets, households and businesses, explains the allocation of resources in addressing scarcity Use this example response to ensure you are scoring your response accurately. In a market economy how does the circular flow of the economy address scarcity? Because our wants for goods and services are unlimited, but our resources for producing those goods and services are limited, we need to use our scarce resources efficiently. The circular flow of the economy addresses scarcity by constructing a very effective system for allocating resources between households and businesses. This allocation occurs through the interaction of individuals and firms in product and factor markets. Through trade, households and businesses exchange what they have in surplus (often gained through the efficiency of specialization) and trade for the resources that they need. Combined together, these interactions determine what goods and services will be produced, how, and for whom. Finally, Write the score you earned at the top of your paper Demand PKT pg. 2 In-class Demand: The willingness and ability for consumers to purchase goods and services at various price points in the market at a given time consumers have to want to and be able to buy the good or service - It has to be both willingness and ability otherwise it’s irrelevant, especially when businesses use this as a tool. - This represents “consumer spending” in the CFE • What does ability to buy something mean? • Pull out your wallets and count the number of $$ you have Gatorade Auction This is a demand schedule. Copy it into your notes. To participate in the auction, you Gatorade Auction must be both willing and able to buy the Gatorade- that is, you have to have the money on hand. SALE PRICE OF GATORADE # OF STUDENTS WILLING TO BUY Demand: • Demand Curve: Graphic expression of demand – shows inverse relationship between price and quantity demanded. • PRICE is on the y axis • QUANTITY DEMANDED is on the x axis Use the Gatorade auction demand schedule to create a demand curve for Gatorade Demanded for Bottle of Gatorade September 2013 Demanded demand: (the Gatorade auction) demand schedule: (the Gatorade prices and bids chart) demand curve: (the demand schedule graphed) Look over your two demand schedules- one for Gatorade and one for M and M’s • What do you think the relationship between price and quantity is? • In other words, when price goes up, what happens to the quantity demanded? • When price goes down what happens to quantity demanded? • Law of Demand: There is an inverse relationship between Price and Quantity Demanded. • If price goes up, then quantity demanded goes down. • If price goes down, then quantity demanded goes up. • This is change is called the price effect – a change in price will cause a change in quantity demanded or supplied. * 1. What is this graph specifically telling us (think quantity and demand) P HEADLINE – September 2, 2014 “Pepsi co, owner of Gatorade, announces that it will double the price of its colorful sports drink at stores nationwide” $2.00 2. Based on the headline above, what is the first way the market for Gatorade is going to change? Why? 50 Q in thousands Demand of Gatorade 3. What is the change in the market for Gatorade going to look like on the graph? Reminder: hang back if you haven’t filled out the google form yet! Warm up 9/5/14 Price Quantity Demande d $.25 14 $.75 13 $1.50 7 $2.50 5 $3.00 3 $5.00 1 New Quantity Demande d Here is our ___________ _________________ we made yesterday for the Gatorade auction. For your warmup: 1. Fill in the blanks above (what is that table to the left called?) 2. Graph the data. Remember, price on the y axis, quantity demanded on the x axis 3. Consider if 10 really thirsty and really rich kids were added to our class. Fill in the new column to the left 4. Graph the new data 5. Answer the following: How are the two demand curves different? 9/5/11 It’s Friiiiiiday. HW- be awesome. Agenda • Warm up • Demand shifts! • Mary’s tuna Objectives • distinguish between demand shifts and demand changes • Apply demand shifts and changes to the scenario of Mary and her grocery store Demand Shifters/Determinants 1. 2. PKT pg. 2 A shift in demand is an increase or a decrease in the quantity demanded at every price point in the marketplace. This is a change that occurs for reasons other than price. Therefore, the law of demand does not apply. • This happens due to a change in one of the demand shifters/determinants. • The price of the good or service has NOT changed. • The whole demand curve shifts either to the left (decrease in demand) or to the right (increase in demand) 2. A demand shifter/determinant is something in the market that causes consumers to increase or decrease their demand for a good or serve at all price points. The demand shifters/determinants are: • Changes in income • Number of consumers • Tastes and preferences • Consumer expectations anticipated change in price, ie an upcoming sale • Change in the price of substitute goods • Change in the price of complementary goods What is a substitute? • Examples: • • • • burritos and tacos Pullover sweatshirts v hoodies Fish and chicken Pepsi and Coca cola • Based off these examples, come up with definition for a substitute good, and think of your own example Complementary good • Examples • • • • Hamburgers and buns Printers and ink cartridges Lamps and light bulbs Soccer cleats and soccer balls • Based off these examples, come up with definition for a complementary good, and think of your own example Change in Demand VS. Change in quantity demanded Shift in demand occurs when there is a change in one of the demand determinants but there is NO change in the price of the good or service. P A change in quantity demanded occurs ONLY when the price of the good or service changes. P B $8.00 A $5.00 $5.00 C $2.00 30 50 100 Q 50 100 Q Mary runs the only grocery store in a 12 block area of San Jose. Many of her customers are elderly and don’t have much income. Mary sells lots of canned tuna fish. It isn’t too expensive, and it is a good source of protein. Mary charges $.79 cents a can all the time, but she has noticed that her sales have changed from time to time. PKT pg. 4 1. When the price of hamburger meat went up 20 cents a pound, Mary sold about 50 more cans of tuna each day. P Explanation: Q Mary runs the only grocery store in a 12 block area of San Jose. Many of her customers are elderly and don’t have much income. Mary sells lots of canned tuna fish. It isn’t too expensive, and it is a good source of protein. Mary charges $.79 cents a can all the time, but she has noticed that her sales have changed from time to time. PKT pg. 4 2. Mary’s customers receive their Social Security checks on the first of the month. Mary sells about 100 more cans of tuna a day at the start of a month than at the end of a month. 3. For a few weeks after there was an article in the newspaper about how the high levels of mercury in tuna, Mary’s sales decreased by 30 cans a day. 4. There was a news story suggesting that a truck driver’s strike might cause food deliveries to be interrupted. Mary sold 100 cans more a day. Warm up • Read the above headline. • Then, draw a graph that shows how the demand curve will change for Nike in the month of September. • Then, explain your graph in 2-3 complete sentences Listed below are the 6 things that cause a demand shift. They are the demand shifters or demand determinants. Identify which one of the 6 was at play in our warm up about Nike’s half off month. In 2-3 complete sentences, explain why you chose the shifter that you did • Changes in income • Number of consumers • Tastes and preferences • Consumer expectations • Change in the price of substitute goods • Change in the price of complementary goods 9/8/14- Happy Monday y’all! • Agenda • Warmup- shifts vs changes Objectives- by the end of this period, you will be able to… • Graphically interpret and distinguish between various situations involving shifts in demand v change in quantity demanded • Explain how consumer expectations cause a shift in demand • Make predictions relating to elasticity Shift in demand VS. Change in quantity demanded Shift in demand occurs when there is a change in one of the demand determinants but there is NO change in the price of the good or service. P A change in quantity demanded occurs ONLY when the price of the good or service changes. P B $8.00 A $5.00 $5.00 C $2.00 30 50 100 Q 50 100 Q DONE? CHECK THESE OUT… 1. Joe eats one can of Spam per week. Recently, Joe received a significant raise in his income. Over the course of the following month, Joe purchased only one can of Spam. Does this situation contradict the law of demand? Why or why not ? 2. When MP3 players became available, the sales of CDs dropped, and the sales of MP3 players soared. Explain why the decline in CD sales does not illustrate the price effect. Is there a demand shifter at work in this example? Explain. 3. In order to increase purchases, a chain of grocery stores reduced its prices and tried to change its image by making stores cleaner and more attractive and by adding lighter foods to the deli menu. Explain how these efforts illustrate a change in quantity demanded and one of the shifters of demand. 5. All of the major hotels on one of the Hawaiian Islands increased their rates in an attempt to raise profits. Two months later, United Airlines reduced the number of flights to Hawaii by twenty percent. Explain what happened in this situation. Warm up- 9/9/14 • Write down a good or service you would buy even if the price doubled. • Then, write down a good or service you would buy even if the price was 10 times more • Last, write down a good or service you would buy if only the price was halved 9/9/14- HW- nope Agenda • Predictions and scenarios surrounding • Defining and graphing demand elasticity • Formative assessment on Demand Objectives- by the end of this class, you will be able to… • Define and draw graphically elasticity of demand • Tell the difference between elasticity and inelasticity With your partner… • Imagine you are the author of a book who gets a royalty payment of 10% from the sale of the book. You get a phone call from your publisher telling you they are increasing the price of your book from $25 to $30. Should you be happy about this? Why or why not? • What assumptions are you making about the change in quantity demanded in your answer? Coupons… • Two of the most common products to offer coupons in the newspaper are breakfast cereals and household cleaners. • Graph what coupons do • Why do these companies offer coupons? • What are they assuming about demand? • Graph the change (a 2$ price increase in Netflix) • Why would such a small change in price send Netflix customers “running”? • What happens to quantity demanded? “Even a $2 price hike in heart surgery could send customers running” • Graph the change ($2 increase in the cost of heart surgery • Why does the headline above seems odd? • What is different between Netflix and heart surgery? Demand Elasticity Definition: • a consumer’s sensitivity to change in price • How much a quantity demanded changes in response to the change in price P P Product A Product B P2 P2 P1 P1 Q2 Q Q1 Q2 Q1 Q • Compare the changes in quantity demanded for Product A and Product B. • Why is there a difference? • Guess why some products might match the graph for A and which products might match the graph for B Demand Elasticity P P Perfectly Elastic Q • A market that is perfectly elastic sells goods where the overriding factor that motivates consumers is price. • It is a market that has many producers who produce many substitutes (virtually identical goods) • The other demand determinants/shifters play little to no role. Perfectly Inelastic Q • A market that is perfectly inelastic sells goods where the overriding factor that motivates consumers is necessity. • It is a market that has few producers who produce a unique good that only a limited number of consumers will purchase no matter what the price. • Is Netflix an elastic or inelastic good? • Redraw your graph of a $2 dollar price increase in Netflix, paying attention to the slope of your line “Even a $2 price hike in heart surgery could send customers running” • Is heart surgery an elastic or inelastic good? • Redraw your graph of a $2 dollar price increase in Heart Surgery, paying attention to the slope of your line Elasticity of Demand For each graph, match the item in the list provided and then explain why you matched that item to the graph. 1. 2. iPhones Bags of Rice 3. Insulin 4. Gas stations Elasticity of Demand For each graph, match the item in the list provided and then explain why you matched that item to the graph. 1. 2. iPhones Bags of Rice 3. Insulin 4. Gas stations Practice on the white boards: • Create a fictitious scenario and graph for the following • Increase in quantity demanded • Decrease in quantity demanded • Increase shift in demand • Decrease shift in demand Demand Back to Back • Sit with your partner back to back so you can’t see each other. • Follow the directions on your handout. • REMEMBER you cannot say the term or describe what it represents. You are describing the image. C.F.A. – Demand Get out a half sheet of paper and write your name, date and period. Please define the following terms: 1. The Law of Demand 2. Change in quantity demanded (please draw a graph as well) 3. Change in demand (please draw a graph as well) C.F.A. - Demand Read the following questions and circle the answer you think is correct. Be prepared to explain your answer. 4. Other things being constant, which of the following would not cause a change in the demand (shift in the demand curve) for mopeds? a. b. c. d. A decrease in consumer incomes. A decrease in the price of mopeds. An increase in the price of bicycles. An increase in people’s taste for mopeds. 5. “Rising oil prices have caused a sharp decrease in the demand for oil.” Speaking precisely and using terms as they are defined by economists, choose the answer that best describes this statement: a. b. c. d. The statement is correct – an increase in price always causes an decrease in demand. The statement is incorrect – an increase in price always causes an increase in demand not a decrease. The statement is incorrect – an increase in price causes a decrease in quantity demanded not a decrease in demand The statement is incorrect – an increase in price causes an increase in the quantity demanded not a decrease in demand C.F.A. - Demand 6. “As the price of domestic cars has inched upwards, customers have found foreign cars to be a better bargain. Consequently, domestic car sales have been slipping and foreign car sales have been moving briskly.” Using only the information in this statement and assuming everything else is constant, which of the following best describes this statement? (You may want to graph the statements to help you identify the correct answer.) a. b. c. d. A shift in the demand curves for both domestic and foreign cars. A movement along the demand curves for both foreign and domestic cars. A shift in the demand curve for domestic cars, a movement along the demand curve for foreign cars. A movement along the demand curve for domestic cars and a shift in the demand curve for foreign cars. After pg. 2 is done, check your understanding. A B D Change in Quantity Demanded on the same demand curve (pt. a to pt. b) Change in Demand at every price point represented by two demand curves and a change in the overall market (i.e. income) D1 P 31. What does graph X show? A. B. C. D. ●A ● B An increase in the quantity demanded. A decrease in the quantity demanded. An increase in demand. A decrease in demand. Q GRAPH X P 42. What does graph Y show? A. B. C. D. D2 D1 Q GRAPH Y An increase in the quantity demanded. A decrease in the quantity demanded. An increase in demand. A decrease in demand. Demand practice PKT pg. 6 1. Scientists Prove Milk Lengthens Life Span • What effect does this have on demand for milk? 5. The price of laundry detergent increases. • What effect does this have on demand for laundry detergent? 2. The price of coffee increases. • What effect does this have on demand for coffee 6. The season changes from spring to summer. • What effect does this have on demand for bathing suits? 3. The birth rate doubles. • What effect does this have on demand for food? 7. Mortgage Interest Rates Reach Record High • What effect does this have on demand for new homes? 4. Builder Completes New Subdivision Next to Movie Theater • What effect does this have on demand for movie tickets? 8. The price of gasoline increases. • What effect does this have on demand for gas?