1. How is Price Determined?
Marketing Unit

2. Terms Surplus---over-supply Shortage---under-supply
Created when supply exceeds demand
Shortage---under-supply
Created when demand exceeds supply
Equilibrium—price where amount supplied = amount demanded

3. Example
Pirate tickets goes on sale for $25 per seat. The stadium holds 38,496. Only 15,000 seats are sold. What should the Pirates do?
Lower the Price to sell surplus goods
Steeler tickets goes on sale for $50 a seat. Heinz Field holds 64, ,000 contact the Steelers to buy tickets. What should the Steelers do?
Increase the price to maximize profits.

4. What causes prices to change?
Changes in demand
Caused by change in consumer taste or preference—change in style
Income—if an entire area is affected by pay increase or cut, prices fluctuate
Substitutes—alternative products for the ones sought after

5. Price Changes Change in supply Costs of production
Food—droughts, frosts, cold weather
Costs of production
Gas