PRICES AND DECISION MAKING 6.2 “The Price System at Work”

Slides:

Advertisements

Similar presentations

Chapter 6: “Supply, Demand and Government Policies”

Advertisements

Copyright © 2004 South-Western Supply, Demand, and Government Policies.

Social Goals vs. Market Efficiency

Copyright © 2004 South-Western 6 Supply, Demand, and Government Policies.

© 2007 Thomson South-Western. Supply, Demand, and Government Policies In a free, unregulated market system, market forces establish equilibrium prices.

Chapter 6: Prices Section 1

Governmental Policy and Supply and Demand. Price Controls Price Ceilings – Highest legal price of a product or good – Binding if below market equilibrium.

Price Controls Chapter 6, Lesson Three.

Economics 1/17/11 OBJECTIVE: Demonstration of Chapter#5 and begin examination of price. I. Administrative Stuff -attendance & distribution.

Prices and Equilibrium. Flexible Unforeseen events such as natural disasters and war affect the prices of many items Buyers and sellers react to the new.

Copyright © 2004 South-Western 6 Supply, Demand, and Government Policies.

Chapter 7 Supply & Demand

Notebook # 16 - Economics 6-3

Economics 4/26/11 OBJECTIVE: Examine how change in demand can affect the prices of goods. I. Journal #19 pt.A -Read “Profiles in.

Copyright © 2004 South-Western 6 Supply, Demand, and Government Policies.

Supply, Demand and Government Policies Chapter 6 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any.

Copyright © 2004 South-Western 6 Supply, Demand, and Government Policies.

Supply and Demand at Work 21.3 & What is Supply and Demand The amount of goods a producer is willing to sell at market prices. Opposite of demand.

Copyright © Pearson Education, Inc.Slide 1 Chapter 6, Section 1 Ch 6: What is the right price? Section 1: What factors affect price?

Chapter 6 notes Supply, Demand, and Government Policies.

6.1 I. Advantages of Prices A. Prices are neutral because they do not favor the buyer or the seller.  Prices are the result of competition  Prices.

Chapter 3: Competitive Dynamics How Competitive Markets Operate Market Equilibrium:  The stable point at which demand and supply curves intersect PRICE.

Chapter 6 notes – all sections

Demand and Supply. Starter Key Terms Demand Demand Schedule Demand Curve Law of Demand Market Demand Utility Marginal Utility Substitute Complement Demand.

Combining Supply and Demand Finding Equilibrium. Balancing a Market Equilibrium: the point at which quantity demanded and quantity supplied are equal.

Copyright © 2011 Cengage Learning 6 Supply, Demand, and Government Policies.

The Lever of Command: Price and Quantity Controls *and the four moments in western history.

Copyright © 2004 South-Western/Thomson Learning Today’s Warm Up Imagine a law was passed that prevented the price of bottled water from increasing above.

Chapter 6: Prices Section 1. Copyright © Pearson Education, Inc.Slide 2 Chapter 6, Section 1 Objectives 1.Explain how supply and demand create equilibrium.

Prices and Decision Making

ECONOMIC MODEL A set of assumptions that can be listed in a table, illustrated with a graph, or even stated algebraically - to help analyze behavior and.

Chapter 6 Supply, Demand, and Government Policies Supply, Demand, and Government Policies 1. Price Ceiling 2. Price Floor 3. Effect of Taxes 4. Tax Incidence.

Prices (Supply + Demand). Market System People’s self-interest drives the economy Consumers want to minimize their costs (Law of Demand) Producers want.

Chapter 6 Supply, Demand, and Government Policies Ratna K. Shrestha.

Chapter 6: Price.

Combining Supply and Demand Buyers and sellers have to meet at a certain point Buyers and sellers have to meet at a certain point This point is called.

Chapter 6 Prices and Decision Making

Prices and Decision Making. Price The monetary value of a product as established by supply and demand Signals: –High prices: producers to produce more.

EQUILIBRIUM, PRICE CONTROLS, & ELASTICITY SSEMI2c, 3b: Explain and illustrate the effects of price floors and ceilings.

Social Goals v. Market Efficiency. How could economic and social goals conflict? -This is partially the reason government plays a role in the economy.

Manipulating Supply & Demand Price floors and ceilings.

© 2007 Thomson South-Western Supply/Demand Review Video: Price Floor/Ceiling.

Setting Prices Advantages of prices –Prices are neutral because they do not favor the buyer or the seller. They are the result of competition Prices are.

Prices Chapter 6. Price The monetary value of a product as established by supply and demand Signals: High prices: producers to produce more and for buyers.

How does minimum wage affect society? Chapter 6 Section 3.

SSEMI2 THE STUDENT WILL EXPLAIN HOW THE LAW OF DEMAND, THE LAW OF SUPPLY, PRICES, AND PROFITS WORK TO DETERMINE PRODUCTION AND DISTRIBUTION IN A MARKET.

What are “demand” and “supply” and how do they work together to determine the prices of goods and services?

Economics 5/3/10 OBJECTIVE: Demonstration of Chapter#5 and begin examination of price. I. Administrative Stuff -attendance & distribution.

Prices and Decision Making Section 1 – Prices as Signals

Price and Decision Making Chapter 6. Price O The monetary value of a product as established by supply and demand. It is a signal that helps make our economic.

2/2 Lead off Do you plan on voting in the upcoming election? Why or why not?

Prices and Decision Making. Life is full of signals that help us make decisions. Price-the monetary value of a product as established by supply and demand-is.

Copyright © 2010 Cengage Learning 6 Supply, Demand, and Government Policies.

Chapter Supply, Demand, and Government Policies 6.

Chapter 7 Demand & Supply Demand & Supply. Demand the amount of a good or service that consumers are able and willing to buy at various possible prices.

© 2011 Cengage South-Western. © 2007 Thomson South-Western Supply, Demand, and Government Policies In a free, unregulated market system, market forces.

Supply & Demand.  Equilibrium-When demand and supply are equal  Disequilibrium- when supply and demand are not equal  *Market Clearing Price/Quantity.

Demand, Supply, Price. DEMAND Demand The desire, ability, and willingness to buy a product Demand Schedule- shows the amount demanded at every price.

Social Goals vs. Market Efficiency

Combining Supply and Demand

Chapter 6 – Prices and Decision Making

Putting Supply and Demand Together

A market with a price ceiling

Prices How do prices help determine WHAT, HOW, and FOR WHOM to produce? What factors affect prices?

Chapter 6 Price!.

Putting Supply and Demand Together

Unit 2: Supply, Demand, and Consumer Choice

Unit 2 Supply/Demand, Market Structures, Market Failures

Supply and Demand: Elastic vs

Presentation transcript:

PRICES AND DECISION MAKING 6.2 “The Price System at Work” Thailand TWO-price system CHAPTER 6 PRICES AND DECISION MAKING 6.2 “The Price System at Work”

Quick recap: In a market economy, prices adjust Moving on…

Market Equilibrium A situation when prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded.

True or False? Companies are closer to selling their products at the equilibrium price when their product first goes on the market vs. after the product has been on the market for awhile. Why is it false? When an equilibrium price is found, it tends to stay there.

Surplus v. Shortage Quantity demanded is greater than supplied Quantity supplied is less than the quantity demanded BOTH ARE SHORTAGES! Which one causes the price to increase? Decrease?

Chart: Factors Affecting Price Changes in Agriculture http://www.glencoe.com/sec/socialstudies/economics/econprinciples2001/pdfs/C06-03C-820487.pdf Which one shows mostly inelastic supply AND demand? The other chart shows an ELASTIC __________ curve. (supply or demand)

The importance of elasticity True or False: Price changes in any given market are likely to be wider if both supply and demand are ELASTIC. FALSE!!! Let’s go back to the chart…

Price question Why is the price of gas more expensive near a freeway? Portland returning car story

PRICES AND DECISION MAKING 6.3 “Social Goals vs. Market Efficiency” CHAPTER 6 PRICES AND DECISION MAKING 6.3 “Social Goals vs. Market Efficiency”

7 Economic & Social Goals Most People Seem to Share: Which TWO are the LEAST compatible with a market economy? Efficiency Economic Growth Equity Full Employment Freedom Price Stability Security

DISTORTING market outcomes Price ceilings: Max. legal price that can be charged Price floors: Lowest legal price that can be paid

PRICE CEILINGS When could it be used? NYC – Rent controls to make housing more affordable for long-term residents Hypothetical situation Rent – Gov’t dictates that apartments could rent for only $1,000/mo Who would this help? Who would this hurt? What would you do if you were the owner/landlord? Change function of building? Incentive for adding more units? Costa Rica – Rent can’t go up for 3 years Good idea? Bad idea?

PRICE FLOORS MINIMUM WAGE! What is the most common example of a price floor? MINIMUM WAGE! Who does this help? Who does this hurt? Lowest wages in this area—Would employer pay less if he/she could? Does this create more unemployment? What do you think? Let’s take a look Equity v. efficiency Minimum Wage in the U.S. http://www.dol.gov/esa/minwage/america.htm

REAL v. NOMINAL?

Minimum Wage & Unemployment

On a supply & demand curve, which will be the price ceiling On a supply & demand curve, which will be the price ceiling? Which will be the price floor?