Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 Prices SECTION 1: The Price System SECTION 2: Determining Prices SECTION 3: Managing Prices CHAPTER 5.

Similar presentations


Presentation on theme: "1 Prices SECTION 1: The Price System SECTION 2: Determining Prices SECTION 3: Managing Prices CHAPTER 5."— Presentation transcript:

1 1 Prices SECTION 1: The Price System SECTION 2: Determining Prices SECTION 3: Managing Prices CHAPTER 5

2 2 Objectives: What is the role of the price system? What are the benefits of the price system? What are the limitations of the price system? The Price System SECTION 1

3 3 Role of the price system: to tell consumers how much it costs to produce or distribute a good or service to tell producers how much consumers are willing and able to pay for a product The Price System SECTION 1

4 4 Benefits of the price system: provides information provides incentives provides choice provides efficiency provides flexibility The Price System SECTION 1

5 5 Limitations of the price system: does not account for all production costs and benefits can be unstable The Price System SECTION 1

6 6 Objectives: What is market equilibrium? How does the price system handle product surpluses and shortages? How do shifts in demand and supply affect market equilibrium? Determining Prices SECTION 2

7 7 Market equilibrium is reached when the quantity supplied and the quantity demanded for a product are equal at the same price. Determining Prices SECTION 2

8 8 How the price system handles product surpluses lowering product prices decreasing quantity supplied increasing quantity demanded Determining Prices SECTION 2

9 9 How the price system handles product shortages: increasing product prices increasing quantity supplied decreasing quantity demand Determining Prices SECTION 2

10 10 How shifts in demand and supply affect market equilibrium: They cause the point of market equilibrium to shift accordingly. Determining Prices SECTION 2

11 11 Objectives: Why do governments sometimes set prices? What do governments try to accomplish through price floors, price ceilings, and rationing? What happens when governments manage prices? Managing Prices SECTION 3

12 12 Reasons governments set prices: to keep the market functioning smoothly to avoid instability caused by dramatic price swings Managing Prices SECTION 3

13 13 What governments try to accomplish by setting prices: price floorsused to try to guarantee producers a certain level of income price ceilingsused to try to maintain affordable costs for goods and services rationingused to avoid shortages and to ensure reasonable prices for goods when supplies are low Managing Prices SECTION 3

14 14 What happens when governments manage prices: creates imbalances between supply and demand prevents markets from reaching equilibrium can create black markets Managing Prices SECTION 3

15 Describe the limitations of the price system Explain the role of the price system. Be sure to include how the price system encourages market equilibrium How can a shift in demand influence a markets equilibrium point? 4. 4.Why might a government establish a price floor on one good or service and a price ceiling on another? 5. 5.Why might a government begin rationing items in the market? Wrap-Up CHAPTER 5


Download ppt "1 Prices SECTION 1: The Price System SECTION 2: Determining Prices SECTION 3: Managing Prices CHAPTER 5."

Similar presentations


Ads by Google