Go Ahead…Take A Guess!!

Prices convey information to both. What do high and low prices tell each? Prices help answer the (3) economic questions What do prices do?

1. They dont favor either party – they result because of competition Why cant Chicken Run charge $500 for chicken fingers? IMPORTANT INFORMATION ABOUT PRICES

2. They are flexible – allows for change Disasters, weather, war effect price and people adjust This is most often seen with products with which type of demand? I dont have anything to write up here

3. They provide choice – if they become too high, people can go elsewhere Dont have anything for here either

4. Markets find their prices without outside help Government does get involved as we will see Thought I had something for here…but I dont

5. Prices are efficient – people can make decisions about purchases and behavior quickly Example: Hong Kong tolls Heres number 5

What system could be used to allocate resources without prices? What are the problems with this system? Review

Draw a supply curve and demand curve on the same graph. Label everything. Find a point on the graph that represents the price and quantity that should be charged. Label that point E. So how do we get to a price?

What is point E called?

What happens if price falls above this point? What happens if price falls below this point? How do shifts in Demand and Supply effect quantity and price? The big questions:

This price leaves me too many - SURPLUS

This price leaves me too few - SHORTAGE

This one is just right!