Download The Price System

THE PRICE SYSTEM
OPENING ACTIVITY: DRAW WHAT YOU REMEMBER
FROM THE SUPPLY AND DEMAND CURVES (CHARTS)
SUPPLY
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Supply- offering of a given good or service for sale
Quantity supply
Input cost
Excise tax- The state or federal tax imposed on the
manufacture and sale of certain non-essential
consumer goods, passed on to the customer in the
form of higher prices.
• Termination- The ability of Congress to end a tribe's
benefits without reason, ending its status as a
sovereign nation.
SUPPLY SHIFT
• Input Costs
• Price goes up to produce a good
• Available technology (improved or loss of technology)
• Gov. Action (tax resources)
• Number of sellers
• Change in producer price expectations
• Weather
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HOW DOES SUPPLY AFFECT THE PRICE
• Think our supply curve
• As the supply increases so does the price
• Price affects demand differently, as the price increases the
demand for the item decreases
• Describe five factors that may cause a shift in a
good’s supply curve.
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Price of the good
Number/quantity
Number of sellers
Price of competition
Technology
Expectations
DEMAND
• Let’s review the demand curve
• Demand is the willingness and ability to purchases a good
and service.
• Teens purchasing their own cell phone vs.
• Demand Schedule
• Perfect Pepperoni pizza
• $5 more is demanded
• $75 demand is less
DEMAND SHIFTS
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Population (moving in or out of an area)
Consumer taste (next product)
Price expectation (waiting to go on sale)
Income
• Change in the price of a substitute good
• Car comparisons
DEMAND FACTS
• “Demand Relationship”
• Between price and the amount (or quantity demanded. Price
affects the increase or decrease of a product and the price
will determine the quantity sold
• Demand does not remain constant. Sometimes,
demand will increase only for a short period of time, so
suppliers must be able to meet that demand quickly.
• Price does not influence the left or right shift in the
demand curve because the price remains constant.
QUIZ ON SUPPLY AND
DEMAND
MARKET AND PRICES
• Market equilibrium- Point where quantity demanded
meets quantity supplied; a balanced market. Once
market equilibrium is reached, there is no incentive for
the consumer or producer to change their behavior.
• Equilibrium price- All of the supplied goods are sold at a
given price.
• The equilibrium price is the price at which buyers are able to
purchase all that they want and sellers are able to sell as much
as they wish. Reaching this price satisfies the desire of both the
buyer and the seller.
• Equilibrium Quantity- The amount consumers demand
and producers supply when the market is in equilibrium.
MARKET AND PRICES
• Incentive- “enticing”
for both producers
and consumers
• Contributors- People
who donate money,
time, etc.
• Price dictate the flow
of the economy
• Regulate flow of goods
and services
• Help people make
purchasing decisions
• Best example Price of
Gas
• Price per barrel
• Price goes up
• More supply
• Price of gas is low
• Incentive for more
people to buy
KEYS TO IDENTIFY
• the increase in demand
led to an increase in
price.
• Prices provide incentives
to both consumers and
producers.
• The initial signal that
demand for a good
exceeds production in
the economy is price
rises.
• The incentive for
producers to increase
supply is the potential to
obtain additional profits
• Once market
equilibrium is
reached, there is no
incentive for the
consumer or
producer to change
their behavior. At that
point, the product
supply has met the
needs of consumers'
demands and
maximized producers'
profits.
NEW EQUILIBRIUM
CHANGES IN MARKET EQUILIBRIUM
• Surplus
• situation in which
quantity supplied is
greater than quantity
demanded
• Usually higher priced
items like projectors
• Shortage
• A situation in which
quantity demanded
is greater than
quantity supplied
best describes
shortage
• Food at a lower price
(demand)
CHANGES IN MARKET EQUILIBRIUM
• Search Costs
• Search costs are the
financial and
opportunity costs
consumers pay when
searching for a good
or service.
• Search Cost
• If Aaron is looking for
a new apartment,
Aaron will miss two
days of work at the
supermarket to visit
• Shortage results
below equilibrium
price.
CHANGES IN MARKET EQUILIBRIUM
• In response to rising car traffic, demand for bicycles
has increased. The new equilibrium point will show
• Bicycles sold
• Price
• What happens when the supply of a nonperishable
good is greater than the consumer wants to buy.
(2 possibilities)
• either the good remains unsold or the price drops
• Holiday shopping (Christmas) results in:
• a rapid shift to the right in a market demand curve.
MARKET QUIZ REVIEW
• Technological process
has reduced the cost of
manufacturing MP3
players. If demand is
unchanged, more MP3
players will be sold at a
lower price.
• A shortage will develop
when the market price is
below the equilibrium
price.
• Use definitions to assist in
quiz
• Search cost
• Elena is looking for an
apartment. Elena misses
two days of work at the
supermarket to visit several
different apartments
available for rent.
• If the current equilibrium
price for a bushel of corn
is $50.00, what happens
to the equilibrium price
of corn if import
restrictions on corn are
lifted?
• Go up
• Goes down
• Stays the same
TOPIC TEST