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Economics Supplemental Notes for Chapter 5 PRICES
Benefits of the Price System Information Incentives Choice Efficiency Flexibility
Limitations of the Price System Also called MARKET FAILURES –Fails to account for some costs and cannot distribute them appropriately.
Market Failures Externalities –Negative –Positive Public Goods Instability
Questions What is market equilibrium? How does the price system handle product surpluses? Shortages? How do shifts in demand and supply affect market equilibrium?
Setting Prices Price Ceilings Price Floors
Consequences of Setting Prices Ceilings / Floors can prevent the market from reaching equilibrium. EXAMPLE: Rental property in NYC.
Rationing Sometimes supply of a good is so low that a government rations to keep some supply. RATIONING: The govt. or other institution decides how to distribute a product.
Rationing doesnt happen often in free enterprise WWII – Rationing tires, gas, meat, butter, sugar, coffee. TODAY: College sporting events. Alums and current students get priority in seating.
Consequences of Rationing Unfair Expensive Creates black markets (underground economies)
Economics Chapter 5. Section 1 Objectives: 1. What is the role of the price system? 2. What are the benefits of the price system? 3. What are the limitations.
Chapter 5 Prices Section 1 The Price System 1. I. The Language of Prices Prices are the main form of communication between producers and consumers 2.
Prices CHAPTER 5 SECTION 1: The Price System
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Chapter 6.3 Notes The Price System. The Language Of Price A system that is a form of communication between producers and consumers. If the consumer wants.
Mr. Bammel. Equilibrium Projects As I discuss all the topics of the equilibrium projects, think about each and be sure that what you put in your projects.
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Chapter Price 6. Objectives: Students will learn… How the market establishes an equilibrium price How the equilibrium price balances supply & demand How.
Chapter 6: Prices Section 3. Copyright © Pearson Education, Inc.Slide 2 Chapter 6, Section 3 Objectives 1.Identify the many roles that prices play in.
Thoughts—Fill in blanks Consumers tend to demand (more/less) of a product when the price is low and (more/less) when the price is high. Producers tend.
Managing Prices. How are price system limitations dealt with? The price systems limitations sometimes lead governments to intervene in the market. Governments.
Chap. 6.1 Market Forces. Market Equilibrium Equilibrium- when the quantity consumers are willing and able to buy equals the quantity that producers are.
The Free Market Price: EQUILIBRIUM & GOVERNMENT Ch. 6, Sect. 6 Why does the government intervene in the market? How does the government intervene? What’s.
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Complete #1 on page 7. Number your definitions (18)
PRICES Chapter 5.
Section 3: What role do prices play in a free market economy?
Today’s Objectives Check Chapter 5 Homework Review Chapter 5 Homework Begin Chapter 6 Notes – Markets and Equilibrium You will… – Understand how to graph.
ECONOMICS Chapter 5, Section 3 Managing Prices. A. Limitations in the Market There are limits to the price system These limits include positive and negative.
The Pricing System. Determining Prices: How a competitive market works ► Market Equilibrium (AKA market clearing price)-- the price where the amount sellers.
Explorations in Economics Alan B. Krueger & David A. Anderson.
Prices and Decision Making Chapter 6. Prices As Signals Price – monetary value of a product est. by supply and demand – “Signal” Prices help producers.
Prices and Decision-Making. Role of Prices Market economy- prices perform allocation function (FOR WHOM?) Advantages of prices –Neutral –Flexible –Free.
Chapter 6: Prices Section 1
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Artificial Barriers Unit 6.3. Artificial Barriers –Your book looks at different scenarios at which there is an artificial barrier that prevents the market.
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Chapter 6. Remind me… What is the market? In the market, demand and supply interact Buyers + Sellers market equilibrium In market equilibrium there.
1 Essential Question: Explain the difference between a Price Ceiling and a Price Floor (explain why these are created and problems that they can create),
CHEVALIER FALL 2015 Supply and Demand Together. Warm-Up #9: Review Notes… Explain the pricing mechanism. When do surpluses occur and when do shortages.
Chapter 6, Section 2. When the supply or the demand curve shifts, a new equilibrium occurs. Then, the market price and quantity sold move toward the.
CHAPTER SIX PRICES. Equilibrium When demand meets supply Demand greater than supply – shortage Supply greater than demand - surplus.
11/9 Do Now 1. What does it mean if an item has inelastic demand? 2. Which way does the demand line slope with inelastic demand? 3. What does it mean if.
Explain: how supply and demand Compare: a market in
Chapter 6 Prices as Signals. Reaching Equilibrium The point where supply and demand come together is called the equilibrium It is the point of balance.
What are “demand” and “supply” and how do they work together to determine the prices of goods and services?
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