CHAPTER 6 PRICES PRICES BRING MARKETS TO BALANCE

CHAPTER 6 PRICES

PRICES BRING MARKETS TO BALANCE MARKET PRICE: __________________________________________ WILLING PRODUCER FOR THE SALE OF A GOOD OR SERVICE. MARKET PRICE IS FOUND BY: • ___________________________ CONSUMERS SEND SIGNALS TO PRODUCERS: • ____________________________________________

WHAT HAPPENS WHEN THE PRICE ISN’T “RIGHT”? DISEQUILIBRIUM: ______________________________________________________ • LEADS TO EXCESS DEMAND • OR TO EXCESS SUPPLY $15. 00 EXCESS SUPPLY – SUPPLY EXCEEDS DEMAND, ________________________ $5. 00 _ EXCESS DEMAND – DEMAND EXCEEDS SUPPLY, ____________ Ex) $ Equilibrium 10. 00

EXCESS DEMAND ---> SHORTAGES EXCESS DEMAND • TO GET BACK TO EQUILIBRIUM, _________________ __

EXCESS SUPPLY ---> SURPLUS EXCESS SURPLUS • TO GET BACK TO EQUILIBRIUM, _________________ __

HOW PRICE IS AFFECTED BY DEMAND SHIFT

HOW PRICE IS AFFECTED BY SUPPLY SHIFT

WHAT DO THE SHIFTS TELL US? WHAT DO YOU THINK THE SHIFTS TELL US (HINT: THERE’S 3 THINGS) ● JOT DOWN YOUR THOUGHTS

WHAT DO THE SHIFTS TELL US? CHANGES IN PRICES…. ● TELLS __________________________________ ● SHOWS ________________ FOR A PRODUCT

THINK-PAIR-SHARE WHEN THE GOVERNMENT DECIDES THAT PRICES ARE _____ OR _______, • IT GETS INVOLVED IN _______. • WHAT DO YOU THINK THOSE WAYS ARE? TRY AND THINK OF REAL WORLD EXAMPLES IF YOU CAN.

WHAT HAPPENS WHEN THE GOVERNMENT IS INVOLVED? GOVERNMENT AFFECTS PRICES IN 2 WAYS: PRICE CEILINGS: ______________ PRICE FLOOR: _______________ • IT CAN BE DIFFICULT TO STOP ________________ DUE TO _______________ FROM THOSE _________________ PRICE CEILINGS AND FLOORSECONOMICS 2. 6 Max. Price Min. Price

WHAT HAPPENS WHEN THE GOVERNMENT (FEDERAL, STATE, OR LOCAL) IS INVOLVED? • WHAT ARE SOME EXAMPLES OF PRICE CEILINGS? __________________________ Max. Price Min. Price • WHAT ARE SOME EXAMPLES OF PRICE FLOORS? __________________________

HOW TO YOU DETERMINE A SHORTAGE OR SURPLUS? SHORTAGE=QUANTITY DEMANDED - QUANTITY SUPPLIED QD - QS SURPLUS=QUANTITY SUPPLIED – QUANTITY DEMANDED QS - QD

BLACK MARKETS: AN ________ WHERE GOODS ARE TRADED AT ________________ THAN THOSE SET BY LAW. • THEY ARE USUALLY __________________________ THAT CAN CREATE SHORTAGES OR SURPLUSES
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