1. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 1 2-3 SUPPLY AND DEMAND Understand the slopes of the supply and demand curves. Find points of equilibrium. OBJECTIVES

2. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 2 widget function demand function demand supply wholesale price markup retail price equilibrium shift Key Terms

3. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 3 Example 1 The Wacky Widget Company sells widgets for $2.00 each wholesale. A local store has a markup of $1.59. What is the retail price?

4. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 4 The wholesale price of an item is x dollars. The retail price is r dollars. Express the markup algebraically. CHECK YOUR UNDERSTANDING

5. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 5 Example 2 The Robear Corporation sells teddy bears at a wholesale price of $23.00. If a store marks this up 110%, what is the retail price?

6. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 6 The graph shows the supply and demand curves for a widget. Explain what happens if the price is set at $9.00. EXAMPLE 3

7. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 7 Use the graph to explain what happens if the price is set at $15.00. CHECK YOUR UNDERSTANDING

8. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 8 A company wants to base the price of its product on demand for the product, as well as on expenses. It takes a poll of several of its current retailers to find out how many widgets they would buy at different wholesale prices. The results are shown in the table. The company wants to use linear regression to create a demand function. What is the equation of the demand function? Round the slope and y -intercept to the nearest hundredth. EXAMPLE 4

9. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 9 Explain why it makes sense that the demand function has a negative slope. CHECK YOUR UNDERSTANDING