Download CFA – Demand

WARM UP- 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. iPhones
2. Bags of Rice
3. The electricity bill
4. Gas stations
9/10/14
Agenda
• Warm up on elasticity of
demand
• Formative assessment on
Demand
• Class Constitution
Objectives, by the end of this class
you should be able to
• Demonstrate your
understanding of Demand shifts
versus change in quantity
demanded
• Identify and describe class rights
C.F.A. – Demand
Get out a half sheet of paper and write your name, date and period.
Remember if you really do not know then write “IDK” or if you are guessing write “guess” next to your response.
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
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.
5.
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.
“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.
C.F.A. – Demand
Please define the following terms:
1. The Law of Demand
• The inverse relationship between price and quantity demanded.
• As price goes up, quantity demanded goes down and vice versa.
2. Change in quantity demanded (please draw a graph as well)
It is a change in the specific quantity of a good that buyers
are willing and able to buy. The change is caused by a
change in the price.
3. Change in demand (please draw a graph as well)
It is an increase or a decrease in the quantity demanded at
every price point in the marketplace because of a one of the
demand shifters/determinants.
C.F.A. – Demand
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.
5.
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.
“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.
Warm up part 2
• What is a constitution?
• What are rights? What are some examples of rights you have in America?
• the basic principles and laws of a nation, state, or social group (ie, this classroom)
that guarantee certain rights to the people in it
• Just as there are fundamental laws and rights in America, so there are
fundamental laws and rights in this classroom.
Fundamental Rights
• The fundamental rights of this classroom are going to be listed on the
next slide
• These rights are broad ideas and need clarification. Your job is to
decide what these rights look like, and what natural consequences
are appropriate for a violation of a fundamental right.
• If you notice that there is something missing form these fundamental
rights, feel free to propose an additional right
The fundamental rights of this classroom
• Right to be safe
• Right to be treated with respect
• Right to hear and be heard
• Right to receive help, obligation
to give it
• Right to learn
• Teacher has the right to make
executive decisions
What does this right
look like?
What are some natural
consequences if this
right is violated?/ What
would make it right?
Warmup
• What do you think could be a connection between these three
images/ events?
9/12/14- SCC update
Agenda
• Warm up- 9/11
• Class constitution
• Supply!
Objectives- by the end of this class
you should be able to
• Predict the influence of 9/11 on
current events
• Identify and describe class rights
• Explain the relationship between
quantity supplied and price
Hourly Pay
Student 1
Hours willing to work for one week
Student 2
Student 3
Student 4
$1.00
$5.00
$7.00
$10.00
$15.00
$20.00
$25.00
$100.00
•
What pattern do you see in the responses?
•
Did anyone choose not to supply labor at any wage rate? Why?
•
What influences your decision to work nor not to work?
•
Why does a higher wage usually increase the number of hours people are willing to work?
•
Would you predict that a different group of people would fill out this out differently?
Total
• How does price affect how you act
• Small decisions? Big decisions?
9/14/14
SCC→ assignments are posted, head’s up for Friday due date
EUQ on demand tomorrow:
Agenda
• How much would you work a
week?
• The law of supply
• Change in supply
Objectives: by the end of class,
you should be able to...
• Explain the relationship between
price and supply and name the
law of supply
• Identify the differences between
a change in quantity supplied
and a change/ shift in supply
Unit 2.1 Demand EUQ response
Get out a sheet of paper. Write your name, date, class period and 2.1 Demand EUQ at the top.
On your paper draw and write in the model below and then respond to the question.
1. Take any product and graph a demand curve for the product. 2. Graph and explain demand elasticity.
Explain and graph changes in quantity demanded. Separately
explain and graph changes in demand with specific reference to a
demand shifter.
Explanation:
Explanation:
Elastic Demand
Explanation:
Explanation with reference to demand shifter:
Inelastic Demand
Hourly Pay
Hours willing to work for
one week
Student 1
Student 2
$1.00
$5.00
$7.00
$10.00
$15.00
$20.00
$25.00
$100.00
•
What pattern do you see in the responses?
•
What influences your decision to work nor not to work?
•
Why does a higher wage usually increase the number of hours people are willing to work?
•
Would you predict that a different group of people would fill out this out differently?
Total
Supply
Supply: The willingness and ability of producers
to supply goods and services at various price
points in the market at a given time.
- What to produce? and Who to produce for?
(BEQs) is answered by producers response to
consumer demand.
- How to produce? The Factors of Production
are central to ability and willingness, both
their availability and their cost.
-
-
ex. Car makers have been looking to produce
hydrogen fuel cell cars but until this past year it
cost close to $1 million per vehicle vs. about
$30,000 for a Toyota Prius
Profit Motive is the driving force for
producers!
This represents “Business to Product Market”
quadrant in the CFE
Supply:
• Supply curve: Graphic expression of supply – shows direct relationship
between price and quantity supplied.
• PRICE is on the y axis
• QUANTITY SUPPLIED is on the x axis
• Law of Supply: There is a direct relationship between Price and Quantity
Supplied.
• If price goes up, then quantity supplied goes up.
• If price goes down, then quantity supplied goes down.
• This is change is called the price effect – a change in price will cause a change in quantity supplied.
• Producers will generally respond to the changes in demand as much as they can. They do not want
to produce too little or too much.
P
1. What is this graph specifically telling us?
2. The sale price of bottled water goes up by $1. Graph this
change.
3. What is the change in the market for bottled water going to
look like on the graph?
$2.00
500
Q
in thousands
Supply of Bottled Water
P
1. What is this graph specifically telling us?
HEADLINE – September 15, 2013
“Earthquake in China leads to widespread destruction
of major plastics producing factories.”
$2.00
2. Based on the headline above, what is the first way the
market for bottled water is going to change? Why?
3. What has NOT changed in the market for bottled water? (at
least not yet)
500
Q
in thousands
Supply of Bottled Water
4. What is the change in the market for bottled water going to
look like on the graph?
5. The sale price of bottled water goes up by $1. Graph this
change.
9/16/14 EUQ cancelled 
Agenda
• Warm up- motivations
• Review of law of supply
• Supply determinants/ supply
shifters
Objectives- by the end of this class
you should be able to
• Explain the relationship between
price and supply and name the
law of supply
• Identify the differences between
a change in quantity supplied
and a change/ shift in supply
P
1. What is this graph specifically telling
us?
2. The sale price of bottled water goes
up by $1. Graph this change.
$2.00
500
Q
in thousands
3. What is the change in the market for
bottled water going to look like on the
graph?
Supply of Bottled Water
Warm up Period 1
Warm up
• When learning about Demand, we have mostly been considering
the perspective of the consumer, or the buyer. What do you think
the main motivation of the consumer is?
• When learning about Supply, we are considering the perspective of
the producer, or the seller. What do you think the main motivation
of the producer is?
Change in Supply and Supply Shifters/Determinants
1.
PKT pg. 2-3
A change in supply is an increase or a decrease in the quantity supplied at every price point in the
marketplace.
• The price of the good or service has NOT changed. Therefore, the law of supply does not apply.
• This happens due to a change in one of the supply shifters/determinants
• The whole supply curve shifts either to the left (decrease in supply) or to the right (increase in supply)
2. A supply shifter/determinant is something in the market that causes producers to increase or decrease their
production of a good or serve at all price points. The supply shifters/determinants are:
• Changes in costs of factors of production
• Number of producers in the marketplace  more producers= increase in supply
• Technology
• Producer expectation of future price
• Government policy – taxes, regulations and subsidies
• Productivity
• Natural disaster or international events
Law of Supply reminder
• As the price of a firm's product
increases, it becomes more
attractive to produce that
product and firms will want to
supply more.
• Why?
What causes this?
P
500
Q
2. The supply shifters/determinants are:
• Changes in costs factors of production
• Number of producers in the marketplace
• Technology
• Producer expectation of future price
• Government policy – taxes, regulations and
subsidies
• Productivity
• Natural disaster or international events
• For each image, turn to a
partner and decide
whether it would look like
graph A or graph B
A
B
Supply – with markers!
1. War in the Middle East Causes Oil Prices to
Skyrocket
5. Typhoon Hits Alaska – Extensive Damage to
Fishing Vessels
• What effect does this have on the supply of
gasoline?
• What effect does this have on the supply of fish?
2. Engineer Invents Faster Way to Make Computer
Chips
• What effect does this have on the supply of
computer chips?
3. New Book Store Opens in Shopping Mall
6. House Prices More Expensive for Second Year in a
Row
• What effect does this have on the supply of
houses?
7. Price of Cotton Falls
• What effect does this have on the supply of books?
• What effect does this have on the supply of tshirts?
4. Damage to Panama Canal Will Slow Coffee
Imports Next Month
8. Government Announces Tax Breaks on
Production of Fuel Efficient Cars
• What effect does this have on the supply of coffee
now?
• What effect does this have on the supply of fuel
efficient cars?
Reasons for Changes in Supply
PKT pg. 5
1. Auto Workers’ Union Agrees to Wage and Benefits
Cuts
5. Cost of Steel Rises
6. Auto Producer Goes Bankrupt, Closes Operation
2. New Robot Technology Increases Efficiency
7. Buyers Reject New Models
3. Nationwide Auto Worker’s Strike Began at Midnight
4. National Government Significantly Reduces Subsidies
on Fuel Efficient Cars
Unit 2.1 Demand EUQ response
Get out a sheet of paper. Write your name, date, class period and 2.1 Demand EUQ at the top.
On your paper draw and write in the model below and then respond to the question.
1. Take any product and graph a demand curve for the product. 2. Graph and explain demand elasticity.
Explain and graph changes in quantity demanded. Separately
explain and graph changes in demand with specific reference to a
demand shifter.
Explanation:
Explanation:
Elastic Demand
Explanation:
Explanation with reference to demand shifter:
Inelastic Demand
Modified Demand EUQ
• Graph and explain demand elasticity
and demand inelasticity.
• You should:
• Have two graphs
• Explain what elastic and inelastic mean
Explanation:
Elastic
Demand
Explanation:
Inelastic
Demand
Unit 2.1 Demand EUQ Scoring Guide
- Swap your response with a partner and write P.R. of “your partner’s name” by “your name” at the top.
- Using your packet, textbook or other resources to check your partner’s responses for accuracy give them a score based on the scoring
guide provided.
Proficient
Graph of elasticity looked similar to
these 
Graphs were labeled P and Q (price and
quantity demanded)
Identified elastic goods as wants, and
inelastic goods as needs
Mentions that Elastic goods are more
sensitive to price, while inelastic goods
are less sensitive to price
Advanced:
explained demand elasticity with
reference to availability of substitutes
Elastic Demand
Inelastic Demand
P
P
Q
Q
Teacher
Desk
White Board
Sherpa,
Punu
MartinezCoronado,
Jeffrey
Gurumurthy,
Wilson, Binh
Greesan
Chan,
Jennifer
Osborne, Walter,
Jamie
Steven
Doeden,
Noah
Galicia, Gerardo
Hsu,
Herbert
Chu,
Isabella
Tang, Kevin
Burns,
Jillian
Henriqu
Ge, Stella ez,
Angel
Malo,
Alexandra
Hahn,
Gordon
Paulsen,
Alexander
ZaragozaChavez,
Alexandra
VargasPerez,
Melissa
Gruspe,
Megan
Huang,
Tiffany
Chan,
Wilken,
Matthew Charles
Young, Hope
Michaels,
Rachel
Kauffman, Weyers,
Karen
Grant
Haggart, Alex
Lamm,
Nicholas
Comstock,
William
Atkinson
, Jenna
9/17/14 Turn in your signed CIS
EC
Agenda
• Formative Assessment:
demand elasticity and supply
• Big Boxes of Bannanas
Objectives
C.F.A. – Supply and Demand Elasticity
Get out a half sheet of paper and write your name, date and period.
Remember if you really do not know then write “IDK” or if you are guessing write “guess” next to your response.
Please define the following terms:
1. The Law of Supply
2. Change in quantity supplied (please draw a graph as well)
3. Change in supply (please draw a graph as well)
C.F.A.
4.
Other things being constant, which of the following would not cause a
change in the long run supply (shift in the supply curve) of beef?
A.
B.
C.
D.
5.
A decrease in price of beef.
A decrease in the price of cattle feed [food for cows to eat].
An increase in the price of cattle feed.
An increase in the cost of transporting cattle to market.
The degree to which the quantity demanded responds to price is called
A.a demand schedule.
B.a demand shifter.
C.elasticity.
D.profit.
C.F.A.
6. Although MVHS Prom bids (tickets) increased by
$40 compared to the previous year, the same number of
bids were sold. This means that:
A.The demand for bids was elastic.
B.The demand for bids was inelastic.
C.The supply for bids was inelastic.
D.The supply for bids was elastic.
C.F.A. - Supply and Demand Elasticity
Score your own responses, please be accurate in your self-assessment
P
Please define the following terms:
1. The Law of Supply
B
• The direct relationship between price and quantity supplied.
• As price goes up, quantity supplied goes up and vice versa.
A
2. Change in quantity supplied (please draw a graph as well)
It is a change in the specific quantity of a good that
producers are willing and able to supply or produce. The
change is caused by a change in the price.
Q
P
3. Change in supply (please draw a graph as well)
It is an increase or a decrease in the quantity supplied at
every price point in the marketplace because of a one of the
supply shifters/determinants.
Q
C.F.A.
Read the following questions and choose the answer you think is correct.
4. Other things being constant, which of the following would not cause a change in the long run supply (shift in the supply
curve) of beef?
A.
B.
C.
D.
5.
A decrease in price of beef.
A decrease in the price of cattle feed [food for cows to eat].
An increase in the price of cattle feed.
An increase in the cost of transporting cattle to market.
“Falling oil prices have caused a sharp decrease in the supply of 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 – a decrease in price always causes a decrease in supply.
The statement is incorrect – a decrease in price always causes an increase in supply not a decrease in supply.
The statement is incorrect – a decrease in price causes a increase in ‘quantity supplied’ not a decrease in supply
The statement is incorrect – a decrease in price causes a decrease in the ‘quantity supplied’ not a decrease in
supply
C.F.A.
Read the following questions and choose the answer you think is correct.
6.
The degree to which the quantity demanded responds to price is called
A. a demand schedule.
B. a demand shifter.
C. elasticity.
D. profit.
7.
Although MVHS Prom bids (tickets) increased by $40 compared to the previous year, the same number of
bids were sold. This means that:
A. The demand for bids was elastic.
B. The demand for bids was inelastic.
C. The supply for bids was inelastic.
D. The supply for bids was elastic.
Big Boxes of Bananas!
• There will be 5 rounds of 5 minutes each.
• During each round your goal is to maximize your buying or selling of big boxes of bananas.
• BUYERS you are looking to buy at the lowest price possible so the price on your card will determine loss or gain. – look at
what your card instructs you to do
• SELLERS you are looking to sell at the highest price possible so the price on your card will determine profit or loss. – look at
what your card instructs you to do
• Each transaction can only use 1 card and it must be in whole $ amounts of 5s or 10s. After each transaction you will record
the ACTUAL SALE price you agreed upon on your individual score sheet.
• After you have two cards in your hand that are the opposite come up to the front and get new ones.
• SELLERS only – tell me your transaction prices when you come to get new cards.
• You may NOT engage in any transactions before or after the market is closed.
• You may NOT get together as a group and negotiate it must all be individual transactions.
Buyers
Sale
Budget
Minus Actual Sale Price
Equals
Net Gain or Loss
(amount stated on buyer card)
1
60
-
40
=
20
2
60
-
80
=
-20
Equals
Net Gain or Loss
Sellers
Actual Sale
Sale
Price
Minus
Production Cost
(amount stated on seller card)
1
40
-
60
=
-20
2
80
-
60
=
20
IN THE NEWS:
Economy in recession. Consumers income
goes down.
IN THE NEWS:
A drought has wiped out 50% of the banana crop!
Government releases a study that shows eating 3 bananas day improves
your memory by 65%.
Economy has recovered. Consumer spending on the rise.
Draft Lesson Plans? Turn them in to your period’s
box
Last reminder on SCC
Agenda
Objectives
• Explain what creates price
• Define Market equilibrium,
market clearing price, demand
equilibrium, supply equilibrium,
surplus, and shortage
• Practice graphing supply and
demand
Warm up:
- What part of the Circular flow did we reenact with the Big Boxes of
Bananas activity? Explain.
- Where does price matter most in the circular flow of the economy?
Price
• The value in $$$ of a product
• Is determined by the interaction
of supply and demand
• High/low prices = incentives for
producers and consumers to enter
market
• Most effective way to answer the
Basic Economic Questions: what,
how, and for whom to produce
Market Equilibrium aka Market clearing price
- The point at which the demand and supply curves intersect this is “snapshot” of a given
time and changes easily
• This is sometimes a result of producers/suppliers responding to demand.
• Suppliers also consider the costs of production (like transportation) along with the
demand of consumers  costs of production are another part of profit
Equilibrium Demand is the
Equilibrium Quantity:
- Only includes the Quantity of a good
or service demanded by a consumer
that equals the quantity supplied by
producers when the market is in
equilibrium.
- Remember, both EP and EQ still
require the willingness and ability of
both consumers and producers.
QS ↑
QS ↓
P↓
P↑
QD↓
P↑
QD ↑
The marketplace when the price effect is at work.
The market always seeks equilibrium.
Remember… It’s a
balance!
Ex. Marshalls and Ross get products that didn’t
initially sell from the original producers because
they set their prices too high.
Surplus:
- When prices are set too high by producers,
a surplus results because the quantity
demanded is lower than the quantity
supplied.
- Businesses are left with too many goods
because they are difficult to sell.
Shortage:
- If suppliers set their prices too low, a
shortage results because the
quantity demanded is higher than
the quantity supplied.
- Businesses are left struggling to keep
up with consumer demands or can’t
meet them.
Ex. The new I Pad is produced assuming a lower
demand or strategically planning to not produce
enough for an estimated demand.
Sale Round 1
Price
Round 2
20
25
30
35
40
Xx
X
Xxx
X
xXxxx
45
50
Xxxx
Xxxxx
55
60
65
70
75
80
85
X
X
Xx
Xx
X
Xx
Recession
X
X
Xx
Drought and Memory
increase
15
X
Xxxxxxxxxxxxxxxxxx
X
X
Xxxxxxx
Xxxxx
Xxxxxxxxxx
Xxx
Xxxxxxxxxx
Xxxxx
Xxxxxxxxxxxxxxxxxxxxxx
Xxxxxxxx
Xxx
X
Xxx
Xx
Xx
X
Xx
Xx
Xxxxxxxxx
X
X
X
X
Ask 3 questions:
1. Are we dealing with DEMAND or SUPPLY?
2. What is the specific good or service we are looking at?
3. Did the price of that good or service change?
Price with markers!
US Government bans imports of Chilean grapes.
• What is the impact on the market for grapes?
P
Scientists determine fertilizers and pesticides
cause health problems.
S
• What is the impact on the market for fruit and
vegetables?
D
Q
Equilibrium Price:
Equilibrium Quantity:
Explanation:
New technology allows for less expensive
production of televisions.
• What is the impact on the market for televisions?
Black Friday is next Friday
• What is the impact on the market for clothes on
Monday?
Warm up 9/22/14
• During spring break, hotel rates rise significantly in many Florida
cities. Why?
• Can you think of other examples that illustrate this phenomenon?
9/22/14- Test on block day! And, I am out on Tuesday
For 4th: I will also be out on Thursday (happy new
year!)
Critical Thinking Reflection- draft due 9/26, final due
Tuesday 9/30
Agenda
• Supply, demand, and price
scenarios
• Review surplus and shortage
• Price floors and price ceilings
Objectives
• Review the terms Surplus and
shortage
• Define price floor and price
ceiling
• Practice graphing supply and
demand
Price with markers!
The price of a product can vary depending on the time and place. Using the laws of
supply and demand, explain the difference in price for each situation. Consider if it is
impacting supply or demand
a. Strawberries in January are more expensive than strawberries in July.
b. Winter clothing on the store rack in November is more expensive than it is in
March.
c.
Ice cream at a beach area is more expensive than at a different location.
d. Day-old bread is less expensive than fresh bread.
Shortage and Surplus
• Copy the graph on the
right onto your
whiteboard
• Graph just this change:
the price of Flaming
Hot Cheetos increases
to $5
• Is this a shortage or a
surplus?
• Graph just this change:
the price of Flaming
Hot Cheetos goes
down to $1
• Is this a shortage or a
surplus?
The Market for Flaming Hot Cheetos
Consider, and graph, the following situations
• MIT estimates that in Santa Clara county, a living wage (pay required to
meet minimum standards of living) for one adult is $12.01/ hour. However,
many jobs (such as food preparation, service, farming, fishing, and
foresting jobs) earn $9.05 to 9.28. What can be done?
• http://livingwage.mit.edu/counties/06085
• “The housing market’s ebbs and flows sent Charles and Christine Byers
bouncing around the Bay Area, from San Francisco to the East Bay and then
back again. But after living with their two children in a $2,500-a–month
two-bedroom, one-bathroom home on 20th Avenue for almost five years,
they soon might have to move into a recreational vehicle.”
• http://www.sfexaminer.com/sanfrancisco/with-no-rent-control-tenantslosing-grip-on-single-family-homes/Content?oid=2652461
Price Floor:
- A minimum price consumers are required to pay for a good or service – any price set by
a producer below a price floor is illegal.
- The goal is to push prices higher in the market, with profit motive in mind, which can
help put more money into the economy.
- Example: minimum wage in California is $8.00 and federal mw is $7.25.
Price Ceiling
Price Floor
Sometimes the government
decides to intervene in the
market to make sure that
scarcity is being addressed
properly through price
controls.
Price Ceiling
Price Floor
Sometimes the government
decides to intervene in the
market to make sure that scarcity
is being addressed properly
through price controls.
Price Ceiling:
- A maximum price consumers may be required to pay for a specific good or service – any
price set by a supplier above the ceiling is illegal.
- This is to ensure that consumers can afford essential goods and services, especially
necessities. It is usually in response to a natural disaster like a crop freeze.
- Example: rent control is often set in cities to ensure affordable housing
Price Floor =
higher than equilibrium
Price Ceiling =
lower than equilibrium
C.F.A. – Price
Get out a half sheet of paper and write your name, date and period.
Remember if you really do not know then write “IDK” or if you are guessing write “guess” next to your response.
1. Around the New Year holiday, hotel rates in Las Vegas go up. Who is responsible for this?
A.
B.
C.
D.
2.
A shortage of MP3 players has occurred in stores during the holiday shopping season. All stores set
their prices before the holiday season began. What explains the shortage?
A.
B.
C.
D.
3.
The airlines because they lower their ticket prices.
The consumers because more people travel to Las Vegas at that time.
The hotels because they want to increase their profits to meet demand.
No one, it is just a glitch in the marketplace.
The price of MP3 players was set at the same level as the market clearing price.
The price of MP3 players was set higher than the market clearing price.
The price of MP3 players was set lower than the market clearing price.
The price of MP3 players could be any amount the consumers were willing to buy.
Graph what occurred in #2, and label the market clearing price (MCP), and the shortage price (SP).
C.F.A. – Price
Get out a half sheet of paper and write your name, date and period.
Remember if you really do not know then write “IDK” or if you are guessing write “guess” next to your response.
4.
If there is a surplus of a product, we can conclude that
A.
B.
C.
D.
5.
quantity demanded exceeds quantity supplied.
consumers want to buy more than is being made available by producers.
the product’s price will rise.
the product’s price is above equilibrium.
Graph what occurred #4, and label the market clearing price (MCP),
and the surplus price (SP).
C.F.A. – Price
6.
All else held equal, when there is an increase in supply,
A. equilibrium price falls, demand does not change, and equilibrium quantity increases.
B. equilibrium price falls, demand increases, and equilibrium quantity increases.
C. equilibrium price rises, quantity demanded decreases, and equilibrium quantity
decreases.
D. equilibrium price falls, quantity demanded decreases, and equilibrium quantity
decreases.
7. Graph what occurred in #6, and label:
•
•
•
•
the original market clearing price - MCP1
the second market clearing price - MCP2
the original equilibrium quantity - EQ1
the second equilibrium quantity - EQ2
C.F.A. – Price Answers
1. Around the New Year holiday, hotel rates in Las Vegas go up. Who is responsible for this?
A.
B.
C.
D.
2.
The airlines because they lower their ticket prices.
The consumers because more people travel to Las Vegas at that time.
The hotels because they want to increase their profits to meet demand.
No one, it is just a glitch in the marketplace.
A shortage of MP3 players has occurred in stores during the holiday shopping season. All stores set
their prices before the holiday season began. What explains the shortage?
A.
B.
C.
D.
The price of MP3 players was set at the same level as the market clearing price.
The price of MP3 players was set higher than the market clearing price.
The price of MP3 players was set lower than the market clearing price.
The price of MP3 players could be any amount the consumers were willing to buy.
C.F.A. – Price Answers
3.
Graph what occurred in the question above, and label the market clearing price (MCP), and the shortage
price (SP).
P
MCP
SP
Q
4. If there is a surplus of a product, we can conclude that
A.
B.
C.
D.
quantity demanded exceeds quantity supplied.
consumers want to buy more than is being made available by producers.
the product’s price will rise.
the product’s price is above equilibrium.
5. Graph what occurred in the question above, and label the market clearing price (MCP), and the surplus price (SP).
P
SP
MCP
Q
6. All else held equal, when there is an increase in supply,
A. equilibrium price falls, demand does not change, and equilibrium quantity
increases.
B. equilibrium price falls, demand increases, and equilibrium quantity increases.
C. equilibrium price rises, quantity demanded decreases, and equilibrium
quantity decreases.
D. equilibrium price falls, quantity demanded decreases, and equilibrium quantity
decreases.
7. Graph what occurred in the question above, and label the original market clearing price (MCP1), the second market
clearing price (MCP2), the original equilibrium quantity (EQ1), and the second equilibrium quantity (EQ2).
S2
MCP1
MCP2
EQ1 EQ2
Price CFA Scores:
Correct
7
6
5
4
3
2-0
Score
Advanced
Proficient
Proficient Basic
Below Basic
FBB
1. Talk through the proposed floors and ceilings below with your neighbors.
2. For each one try and figure out how it would be implemented.
3. For each one come up with intended consequences and unintended consequences.
Price Floors
Price Ceilings
• Raise the minimum wage to • Price ceiling for health
$15 p/h
insurance coverage
• Price floors for companies like • Price ceiling for college
Wal Mart
tuition
Demand, Supply, Price practice
for each headline decide what the impact is going to be on quantit OR Supply OR Demand – indicate the shifter
Price of Rubber Increases Dramatically
Movie Increases Popularity of Baseball
Hats
Price of Running Shoes Drops
Drastically
Two New Blue Jeans Companies Enter
the Marketplace
Consumers Worry the Price of
Computers May Increase Next Month
Government Sets Price Ceiling Below
Equilibrium Price to Help Consumers
Save Money
Insects Kill Half the World’s Tomato
Crop
Rececssion Hits – Many Consumers
Lose Jobs (impact on movie ticket
sales)
Demand, Supply, Price practice
for each headline decide what the impact is going to be on quantit OR Supply OR Demand – indicate the shifter
Price of Computer Chips Falls
(impact on computer market)
Price of DVD Players Plummets
(impact on DVD market)
Price of Salmon Skyrockets (impact
on tuna market)
New, More Efficient Assembly Line
Technology Introduced (automobile
market)
Government Places Sales Tax on
Cigarettes to Discourage Smoking
(impact on cigarette market)
Government Sets Price Floor Above
Equilibrium Price to Help Farmers
(impact on milk market)
• Sit wherever you like and get out a pencil.
CTR #E1: In a different color, write “reviewed by (your name)
• When you receive your scantron please write your
name, date, class period and Unit 2.1 assessment
and VERSION ___
In the margins, add the following notations where you find each
expectation.
• Please do not write on the assessment, read
questions carefully and take your time. Use scratch
paper provided as needed.
• SCTY DEF– defines scarcity
• When you’re done hand it in the assessment up
front.
Prompt: Which of the six principles of economic thinking most
applies to addressing scarcity?
• PET – conveys a clear claim identifying which of the Principles
of Economic Thinking most applies to addressing scarcity
• J/A – justifies the claim with effective selection and analysis of
relevant content
• Pick up your CTR #E1 first draft and exchange it
with a partner.
• CNT – includes relevant content from Unit 1 content rubric and
Chpts 1, 2 & 4
• Do peer review of your partner’s draft following
instructions on the right →
• ADV:NI – generates inferences or use of evidence that is
independent of instruction or text
• Return CTR to your partner when you’re done.
• ADV: ALT – explains an alternative response to the prompt
• Spend whatever time is remaining either:
• Working on other classes work
• Reading one of the articles provided up front
• Writing a draft of CTR #E1 if you don’t yet
have one.
At the end list the items they are missing in order to achieve
proficiency. Add specific suggestions and constructive comments.
Provide verbal feedback to your partner when appropriate.