Presentation on theme: "Social Goals vs. Market Efficiency Chapter 6: Section 3 Kishan Patel, Harriotte Davis, Katherine Bishara, Sava Patel."— Presentation transcript:
1Social Goals vs. Market Efficiency Chapter 6: Section 3 Kishan Patel, Harriotte Davis, Katherine Bishara, Sava Patel
2Main IdeaTo achieve one or more of its social goals, government sometimes sets prices.Key ConceptsDescribe the consequence of having a fixed price in a market.Explain how loan supports and deficiency payments work.Understand what it means when “markets talk”.
3Goals of a Market Economy Two goals of a market economy are equity and security. To protect these, the government sets price floors and price ceilings.
4VocabularyPrice Ceiling – maximum legal price that can be charged for a productEx.) Landlord wants $9002 million apartments availableGovernment changes $600Demand for 2.4 millionLandlord wants more moneyChanges apartment into condos & office buildingsSupply of 1.6 million apartmentsShortage of 800,000
5Vocab. Cont’d. 12 million workers Minimum wage $5.15 Price Floor – lowest legal price that can be paid for a good or serviceMinimum Wage – the lowest legal wage that can be paid to most workersEx.) Equilibrium price $412 million workersMinimum wage $5.1514 million workers10 million hired4 million surplus
6Vocab. Cont’d.Nonrecourse loan – loan taken by farmers that carries neither a penalty or further obligation to repay if not paid backCommodity Credit Corporation (CCC) – an agency in the Department of Agriculture, to help stabilize agricultural pricesTarget Price – a price floor for farm products
7Example of Nonrecourse Loan Ex.) $4 per bushel target price for wheat10,000 bushel produced8,000 sold2,000 picked up by CCCTotal of $40,000Agricultural Price Support Programs
8Vocabulary Cont’dDeficiency Payments – Check sent to producers that makes up the difference between the actual market price and the target priceEx.) $4 target price$2.50 open marketSold 10,000Difference $1.50Difference x 10,000= paid $15,000by gov’tAgricultural Price Support Programs
9“Markets Talk”“Markets are said to talk when prices in them move up or down significantly.”For example, if the government were to raise taxes, investors might sell some of their stocks for gold and cash. Stock prices fall, gold prices rise. The market responds to what investors feel is a good idea or a bad idea.If all were not against this new policy, only some, some investors would sell while others would buy.
111. Where does the equilibrium price lie on a graph? A: The equilibrium price lies where the supply and demand curves intersect.
12Answer: C – Nonrecourse loan 2. Which of these carry neither a penalty nor obligation to repay if not paid back? A. Deficiency payments B. Target price C. Nonrecourse loan D. Loan supportsAnswer: C – Nonrecourse loan
13True or False3. Under the loan support program, a farmer borrows money from the CCC at the target price and pledges his/her crops as security in return.A: True
144. ____________ are impersonal mechanisms that bring buyers and sellers together. Markets