Download The price is right: price, equilibrium, elasticity, and incentives

Students will be able to explain how
prices are determined and analyze how
prices change through the interaction
of buyers and sellers in a market.
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What is the incentive for sellers when pricing
goods?
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Think of a product you purchased recently. If
the product decreased would you purchase
more?
If the product price doubled would you still
purchase the product?
Why or why not?
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https://www.youtube.com/watch?v=rJnm7ja
nvUA
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Buyers want the best value at the lowest price
possible, and sellers want the highest possible
price to make a profit.
Interaction of buyers and sellers, as well as
supply and demand
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1. how much buying power (money or credit)
they have available.
2. how much satisfaction they would get from
the product. ( use, status, or other
measurements of value)
3. the relative price of the product as compared
to other products.
Item
Music download
Gym shoes
Can of pop
Movie ticket
Cell phone
Newest video game
Maximum amount you would pay
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Price- the amount of money that people pay
when they buy a good or service; the amount
they receive when they sell a good or service.
Equilibrium price- the price at which the
quantity demanded by buyers equals the
quantity supplied by sellers; also called the
market-clearing price
Demand- the quantity of a good or service that
buyers are willing and able to buy at all
possible prices during a period of time
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Supply- the amount of a good or service that
producers are willing and able to offer for sale
at each possible price during a given period of
time.
Market price- the current price at which an
asset or service can be bought or sold
Incentive- any reward or benefit, such as
money, advantage, or good feeling that
motivates people to do something
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Elasticity of demand- the percentage change in
quantity demanded as a result of the
percentage change in demand price. Generally,
a relative response of a change in quantity
demanded to a relative price change.
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Read the statements and decide whether you
think the price will increase or decrease
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Supply and demand
Cost and expenses
Consumer perceptions
Competition
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What does this clip demonstrate?
Illustrates the effect of elasticity and incentive
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Elasticity indicates how a change in price will
affect changes in the amount demanded and
supplied
Elasticity of demand: demand changes when
prices change
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When prices go up, people will often cut back and
buy less, which will lead to a decrease in demand
When prices start to fall, consumers will often
demand more
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The goal is to find the equilibrium price.
The point at which the quantity of a good or
service that buyers demand is equal to the
quantity that sellers are supplying.
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Many of these goods and services are luxuries
that people do not need to survive.
Wide range of items available if you have the
money- smart phone upgrade, 3D TVs, jewelry,
vacations
 Demand for these goods is very elastic and driven by
price
 Ex) more consumers will purchase tickets for a
vacation when the price is low than when it is high
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Most consumers spend the majority of their income
on goods and services they need to survive.
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What are some other goods or services that
have elastic demand?
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Demand usually is inelastic for goods and
services needed to survive.
Most consumers consider it necessary to pay
for:
Power for their homes
Prescription medicines
Demand for these products remains about the
same even when prices increase
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Inelastic demand might change slightly
This change is not significant
Some consumers may not buy as much when price
increase
 Overall demand will stay about the same.
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Price does not influence inelastic demand the
same way that it influences elastic demand
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What are some other goods and services that
have inelastic demand?
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Create a graph showing supply and demand
and equilibrium of the product in the supply
and demand activity.