1. Date: March 21, 2013 Topic: The Role of Prices Aim: How do prices play a role in the free market? Do Now: Multiple Choice Questions

2. How big is the surplus of workers when the minimum wage is $5.15 an hour? 4 million workers. NOW LOOK, NOW WATCH! APPLICATION!

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5. Prices are a tool for distributing goods and resources throughout the economy. Price helps move land, labor, capital into the hands of producers, and finished goods into the hands of buyers.

6. SO A GUY WALKS INTO THE STORE….WOULD YOU LOOK THROUGH THIS? WHY NOT?

7. Buyers/Sellers look at prices to find information on a good’s demand and supply. Tells a consumer or producer how to adjust. Whether goods are in short supply or readily available.

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10. High price: a specific good is in demand and more is produced. New suppliers will also join the market. Low price: a good is being overproduced. Original price: $85.00 Price: 20% Off Price: $40.00 save 53%

11. PEOPLE BUY ABERCROMBIE AND FITCH CLOTHING BECAUSE IT SAYS ABERCROMBIE AND FITCH! ABERCROMBIE PRODUCES MORE CLOTHING AT A HIGH PRICE BECAUSE PEOPLE ARE WILLING TO PAY FOR IT.

12. When a supply or demand shift changes the equilibrium, price and quantity supplied need to change to solve problems. Prices: Easily increase or decrease. Raising prices is the quickest way to resolve excess demand. Income, population etc. with demand Income costs, technology with supply

14. Free Market pricing distributes goods through millions of decisions daily by consumers and suppliers. Prices helps goods flow through the economy without a central plan.

15. Command Economy: One organization decides what goods are produced and how much stores will charge for these goods. BUT!

16. When people conduct business without regard for government controls on price or quantity.

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18. Adam Smith Businesses prosper by finding out what people want, and then providing it.

19. SUMMARY: How do prices play a role in the Free Market?

20. 1)Imperfect Competition: Can affect prices, and higher prices can affect consumer decisions. 2)Spillover Costs: Externalities, that include costs of production. 3)Imperfect Information: Can prevent a market from operating smoothly