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. Warm-UpWarm-Up Determine the sign (+ or -) of the slope of each graph. 3y = 9 – 4x 3y = 4x – 9 4x + 3y = 9 Slide 2

3. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 3 widget - new, unnamed product function - rule that assigns a unique member of the range to each element of the domain demand function - relates the quantity of a product to its price demand - the quantity consumers want supply - the quantity of items available to be sold wholesale price - price the manufacturer charges the retailer markup - Retailers increase the price a certain amount so the retailer can make a profit. retail price - price the retailer sells the item to the public equilibrium - Where the functions of supply and demand intersect shift - The movement of the demand curve Key Terms

4. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Skills and Strategies Markup rate × Wholesale price = Markup Markup + Wholesale price = Retail price Slide 4

5. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 5 Demand Function Supply Function

6. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 6 Law of Supply and Demand

7. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 7 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?

8. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 8 The wholesale price of an item is x dollars. The retail price is r dollars. Express the markup algebraically. CHECK YOUR UNDERSTANDING

9. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 9 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?

10. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 10 A banner company sells 5-foot banners to retailers for x dollars. The St. James Sign Shop marks them up 90%. Express the retail price at the St. James store algebraically. CHECK YOUR UNDERSTANDING

11. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 11 The graph shows the supply and demand curves for a widget. Explain what happens if the price is set at $9.00. EXAMPLE 3

12. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 12 Use the graph to explain what happens if the price is set at $15.00. CHECK YOUR UNDERSTANDING

13. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 13 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

14. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. Slide 14 Explain why it makes sense that the demand function has a negative slope. CHECK YOUR UNDERSTANDING

15. Financial Algebra © 2011 Cengage Learning. All Rights Reserved. ApplicationsApplications Pages 78 – 79, #2 – 8 even Slide 15