Demand, Supply, and Prices

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Demand, Supply, and Prices

• Chapter 6

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Section 1

• Key Terms
• Market equilibrium
• Equilibrium price
• Surplus
• Shortage
• Disequilibrium

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Section 1

• How do we get market equilibrium and equilibrium
  price?
• Demand and supply interact to determine
  equilibrium price

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Section 1

• What causes surplus, shortage, disequilibrium?
• When there is a surplus prices tend to fall

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Disequilibrium

• Always working our way back to equilibrium

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The same works for supply
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Equilibrium Prices

• Consumers want less or producers supply more
  prices fall
• Consumers want more or producers supply less,
  prices rise

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Section 2

• Key Terms
• Competitive Pricing
• Incentive

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Section 2

• Competitive Pricing
• Examples?
• Swim suites- some are selling for 15 some for 30

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Characteristics of Price System

• It is neutral
• It is market driven
• It is flexible
• It is efficient

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Prices Motivate Producers/Consumers

• Producers
• Provides information
• Shows if the producers should enter a market or
  not
• Shortage signals increase prices
• Provides motivation
• Motivated to enter the market at higher prices

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Prices Motivate Producers/Consumers

• Consumers
• Surpluses (lower prices) time to buy
• High pricesnot the time to buy
• Remember inferior and normal goods?
• Price influences buying habits

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Michael Dell

• Beat the Competition
• Efficient
• Internet

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Section 3

• Key Terms
• Price Ceiling
• Price Floor
• Minimum wage
• Rationing
• Black market

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Price Ceilings

• Stops prices from going up (balloon goes up what
  stops it?)
• Rent

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Price Floors

• A minimum price that buyers must pay for a
  product
• You cant go below the floor
• Milk, corn, etc
• Minimum wage

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Rationing/Black Market

• WWII rationing
• Look for substitutes during rationing
• Ex?
• North Korea

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Section 4

• Libya unrest
• Consumer Demand
• Entering the travel season
• Summer
• Japan
• Used nuclear power (thats now not an option)
• Must look to oil