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Ch.6 Prices Section 1 (part 1), Combining Supply and Demand Cesar Garrido Period 2 Ms.Mitat

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Presentation on theme: "Ch.6 Prices Section 1 (part 1), Combining Supply and Demand Cesar Garrido Period 2 Ms.Mitat"— Presentation transcript:

1 Ch.6 Prices Section 1 (part 1), Combining Supply and Demand Cesar Garrido Period 2 Ms.Mitat

2 Balancing the Market Equilibrium is the point of balance between price and quantity. * To find the equilibrium price and equilibrium quantity, just look at the price at which the quantity supplied equals the quantity demanded. * To find the equilibrium price and equilibrium quantity, just look at the price at which the quantity supplied equals the quantity demanded. We can also illustrate equilibrium with a supply and demand graph. We can also illustrate equilibrium with a supply and demand graph. Market Equilibrium

3 Disequilibrium Disequilibrium happens if the market price or quantity supplied is anywhere but at the equilibrium. This also happens if the quantity supplied is not equal to the quantity demanded. - Excess Demand - Excess Demand Excess demand occurs when quantity demanded is more than the quantity supplied.

4 Excess Supply Excess supply occurs when quantity supplied is more than quantity demanded. Whenever the market is at disequilibrium and prices are flexible, market forces will push the market towards equilibrium. Excess Supply

5 Yeniffer Sanchez Ch.6 Section 1, Part 2. -Price Ceilings - The Cost of Price Ceilings - Ending Rent Control -Price Floors -Resources: The textbook Graphics : nomics.htm nomics.htm

6 Price Ceilings Top price that the government implant for the sellers to charge a good or service. -They decides whats the maximum price. -Government limits the sellers income. - Price ceiling increases the quantity supplied.

7 Price Ceilings Government places price ceiling on some goods that are considered essential" and might become too expensive for some consumers. Goods and services. Too Expensive. Price Ceiling. Graphic: _a_tv_junkie_a_blog_f/2008/08/guess -who-cant-go-to-the-emmys-because- they-dont-have-the-cash.html _a_tv_junkie_a_blog_f/2008/08/guess -who-cant-go-to-the-emmys-because- they-dont-have-the-cash.html

8 The Cost of Price Ceiling Long waiting lists. Discrimination by Landlords: Wealthy people rented apartments at prices much less than maker value. They allocate the Scarce supply of Apartments among The many people Who want them. Graphics: aring.aspx aring.aspx au_County_Rental_Apartment_Search/Nassau_County_Apar tments_for_Rent.html

9 The cost of price ceilings Since the rents controls landlords profit, they try to increase their income by cutting cost. Why? Because of the waiting list to get new apartments. *The cost of price ceilings for renters. Landlords loose interest in working hard to attract renters. Renters would wait months to have routine problems fixed. Graphics ;

10 Ending Rent Control Benefits: -Increases the number of apartments on the market by 10 000. -Exceed the costs suggesting that there are better ways to help poor households find affordable housing. Graphics: controls-201110273.html controls-201110273.html

11 Price Floor Minimum Price, set by the government that must be paid for a good and services. -The government wants sellers to receive some minimum reward for their efforts. Minimum Price For Goods and Services. The end. Graphics :

12 Chapter 6 Section 2 Focus: When a supply/demand curve shifts, so does the equilibrium. Market price and quantity then move toward the new equilibrium

13 How do price and quantity move toward equilibrium? If there is excess supply the prices will fall and the demand will begin to rise until the two factors equal If there is limited supply the prices are high and the demand will begin to decrease until the two factors equal each other 2 factors that can cause disequilibrium: shift in entire demand curve or supply curve

14 Changes in Price Factors that include shifting supply curve: advances in technology new government taxes and subsidies changes in the prices of the raw materials labor used to produce goods

15 Market equilibrium occurs at intersection of supply curve and demand curve. So shift in supply curve creates new equilibrium and market forces will begin to approach that equilibrium of price and quantity sold.

16 Shift in Supply Advances Understanding a Shift in Supply Advances in production have allowed for manufactures to offer more products at lower prices causing the prices to fall and the supply curve to shift.

17 Finding a New Equilibrium Surplus: when quantity supplied exceeds quantity demanded at a specific price. When supply increases, prices fall and quantity demanded increases to reach a new equilibrium.

18 Change moves along the demand curve, does not shift the entire thing. Price falls to a point where quantity supplied and quantity demanded are equal; and excess supply is not a problem. When supply increases, and the entire supply curve shifts to the right.


20 Changing Equilibrium Quantities demanded and supplied are higher, and the prices are lower. Curve is continually shifting and equilibrium changes as market conditions change.

21 Frequent price changes, sales, and rebates are designed to keep the machines moving out of stores as fast as new machines come in.

22 Photo References Slide 1 - Slide 2 Slide 3 m Slide 4 Slide 5 Slide 6 Slide 8 Slide 9 Slide 10 Section to be continued…

23 Chapter 6 Section 3: The Role of Prices

24 Prices help move land, labor, and capital into the hands of producers, and finished goods into the hands of buyers. The process of buying things such as presents would be way more complicated without prices. Without prices the supplier would have no consistent and accurate way to measure demand for a product. Graphic: Information: Economics textbook

25 Everyone (buyers and sellers) looks at prices to find out info on supply and demand of goods. Rising prices in a market will cause existing firms to produce more goods and will attract new firms to enter a market. High prices indicate producers that a specific good is in demand; therefore they should use their resources to produce more. Graphics: Information: Economics textbook

26 Low price means that a good is being overproduced. For consumers, a low price indicates that they should buy more goods. It also indicates that the good has a low opportunity cost and offers a good buying opportunity. High price is a red light to stop and think carefully before buying. Prices are flexible. Prices can be increased to solve excess demand, or decreased ton eliminate excess supply. Graphics: Information: Economics textbook

27 - Supply shock is a sudden shortage of a good. - Rationing is dividing up goods and services using criteria other than price. - Free market pricing distributes goods through millions of decisions made daily by consumers and suppliers. - A benefit of a market-based economy is diversity of goods and services consumers are able to buy. Graphics: Information: Economics textbook

28 A Wide Choice of Goods Market-Based: Price gives suppliers a way to allow consumers to choose among similar products. Also allows producers to target a audience. Example: If someone saw a sweater for $20.00, another sweater that was the same look just different material for $40.00. A person might go for the cheaper sweater to save money. Source: Textbook. Picture source:

29 Command Economy: One organization decides what goods are produced and how much stores will charge for these goods. Example: They restrict production to a few varieties of each product. Source: textbook Picture Source: _En6iTk1RE0woKgykCeMWWgFCMuM=&h=301&w=472&sz=5&hl=en&start=28&zoom=1&tbnid=S7CMk9_Y45P6aM:&tbnh=100&tbnw=1 57&ei=pending&prev=/images%3Fq%3Dcommand%2Beconomy%2Bdiagram%26um%3D1%26hl%3Den%26biw%3D1420%26bih%3D71 5%26tbs%3Disch:10%2C536&um=1&itbs=1&biw=1420&bih=715&iact=rc&dur=125&oei=iIyITZ2XI47ogQfBoqjXDQ&page=2&ndsp=32&ve d=1t:429,r:5,s:28&tx=111&ty=41&page=2&ndsp=32&ve d=1t:429,r:5,s:28&tx=111&ty=41

30 Rationing and Shortage During a shortage the government decides the price. During WWII, choices in products were limited so the government began to control the distribution of goods. Source: Textbook Picture Source: hNzxRaIT8dQHTdO_xz5R1- 7s=&h=450&w=357&sz=41&hl=en&start=0&zoom=1&tbnid=z58SzsRTS4tTiM:&tbnh=140&tbnw=111&ei=Ko2ITbPOFeqE0QGh2K3r DQ&prev=/images%3Fq%3Drationing%2Band%2Bshortage%26um%3D1%26hl%3Den%26biw%3D1420%26bih%3D715%26tbs% 3Disch:1&um=1&itbs=1&iact=hc&vpx=122&vpy=64&dur=47&hovh=252&hovw=200&tx=140&ty=149&oei=E42ITefjLsf3gAePmaS1D Q&page=1&ndsp=30&ved=1t:429,r:0,s:0

31 The Black Market Black Market: When people conduct business without regard for government controls on price or quantity. Black Markets that include trade is illegal and strongly discouraged. Source: Textbook Picture source: directory/b/black_market.asp&usg=__m5Tw0_3mLBJUo6T_-tc5e_- UyQU=&h=400&w=349&sz=32&hl=en&start=0&zoom=1&tbnid=nBqIOmXzz7O_YM:&tbnh=136&tbnw=119&ei=pending&prev=/images%3Fq%3Dwhat%2Bis%2Ba %2Bblack%2Bmarket%26um%3D1%26hl%3Den%26biw%3D1420%26bih%3D715%26tbs%3Disch:1&um=1&itbs=1&iact=rc&dur=281&oei=OJGITcvEH4eDtgeP8 PCJDg&page=1&ndsp=30&ved=1t:429,r:19,s:0&tx=59&ty=88

32 Efficient Resource Allocation Efficient Resource Allocation: Economic resources – land, labor, and capital – will be used for their most valuable purpose. Changes take place without any central control. The people decide. Source: textbook

33 Prices and the Profit Incentive Depending on a situation it makes producers choose prices. Example: If a heat wave were to be on its way. There would be a high demand for Air Conditioners and fans. So producers would raise prices to reach the incentive. Source: textbook Picture source: price_Fixing_Decision_Overturned_by_US_Supreme_Court&usg=__Cu7eJVSsKPgfTx6joHjnTQZjamw=&h=600&w=520&sz =28&hl=en&start=0&zoom=1&tbnid=aXFqtu- r0mM_DM:&tbnh=128&tbnw=111&ei=19yJTZvwJ8K1tgfHx4joDQ&prev=/images%3Fq%3Dprice%2Bdecision%26hl%3Den% 26biw%3D1148%26bih%3D679%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=rc&dur=172&oei=19yJTZvwJ8K1tgfHx4joDQ& page=1&ndsp=27&ved=1t:429,r:0,s:0&tx=51&ty=88& page=1&ndsp=27&ved=1t:429,r:0,s:0&tx=51&ty=88

34 Market Problems 1- Imperfection competition, affect prices higher prices can affect consumer decisions. 2- Spillover costs (externalities) cost of production, (air and water pollution) 3- Imperfect information- prevent a market from operating smoothly. Source: Textbook Picture source: problems.jpg&imgrefurl= problems/&usg=__KhDWwLGlsaIelytKcrLbLujukV8=&h=200&w=325&sz=19&hl=en&start=0&zoom=1&tbnid=EyuygM5j5W6LpM:&tb nh=100&tbnw=163&ei=FN2JTcyKI4O4tgeawJCCDg&prev=/images%3Fq%3Dmarket%2Bproblems%26hl%3Den%26biw%3D1148 %26bih%3D679%26gbv%3D2%26tbs%3Disch:1&itbs=1&iact=rc&dur=187&oei=FN2JTcyKI4O4tgeawJCCDg&page=1&ndsp=18&v ed=1t:429,r:0,s:0&tx=88&ty=83&page=1&ndsp=18&v ed=1t:429,r:0,s:0&tx=88&ty=83

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