economics – chapter 4 part 1. everyone knows that when we teach econ, we teach supply &...
TRANSCRIPT
Economics – Chapter 4 Part 1
Everyone knows that when we teach econ, we teach supply & demand. why?
because of what it tells us
P
QD
S
Let’s say you have access to the following resources...
would you produce
348 N. Arizona Ave
or why? 3 of 20
Or let’s say you live here ....
would you choose to produce
and you have access to these resources....
why?
or
Let’s say Michael wants to buy this car.
What price does he want to pay?
Leandra is selling the car. What price does she want to charge?
Your fatherhas something to tell you.
of economics
“If he charges too much for his wares, or if he refuses to pay as much as everybody else for his workers, he will find himself without buyers in the one case, and without workers in the other.”
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So how do we determine the price?
Buyers and Sellers interact to determine the price.
Michael would like to pay the _________ possible price. Why can’t he?
lowest
Because he has to compete against all these other buyers ...
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Leandra would like to charge the _________ possible price. Why can’t she?
highest
Supply
Demand
Price
Quantity
Equilibrium Price
Buyers competing against each other drive the price ________.Sellers competing against each other drive the price ________.
up
down
At equilibrium ....
Every buyer willing and ________ to pay the price got the goods & services he desired.
able
Every seller able to produce at that price was able to sell _______ she wished.
There are neither .... too many = ___________nor too few = ___________
all
surplusesshortages
Supply
Price
Quantity
Equilibrium Price
At equilibrium ....
Did every buyer who wanted one get one? Did every seller who wanted to produce, produce one?
Demand
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Your 20 & 18-year-old cousins are calling and inviting you on a 3-day weekend beach vacation to Rocky Point.
Hear the ocean waves…
…enjoy 3 different pools…
…water sports…
…photo in a big sombrero sitting on a donkey.
Your parents are fine with you going since it’s with family.
Weather will be great.
Price includes the cost of the room in your uncle’s condo, free water sports, gas money & two meals a day eating uncle’s food.
How many of you would be willing to go on this 3-day weekend if the price were…..
$200
PriceNumber of New
TravelersQuantity
Demanded
Copy this chart onto your paper.
$150
$75
$50
$25
Now plot the data on this graph on your paper.
Price
Quantity
$100
$50
$25
$150
$200
$75
5 10 252015
Beach Vacations
Note that the demand curve is _______________ sloping.
Price
Quantity
$100
$50
$25
$150
$200
$75
5 10 252015
Beach Vacations
D
downward
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To be on the demand curve a person must be ___________ and _________to purchase the product or service.
D
Qd
Quantity
$100
$50
$25
$150
$200
$75
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Beach Vacations
Note that quantity demanded is just a point on the curve.
willingable
is the entire curve.
Price
D
Qd
Quantity
$100
$50
$25
$150
$200
$75
5 10 252015
Beach VacationsPrice
So if you are told there was a change in price of beach vacations, this would be movement _________ the curve.
along
Quantity demanded rises as price falls, & quantity demanded falls as price rises, other things constant.
This would be illustrated by movement _________the demand curve.
along
However, there are 8 variables other than _________ that will shift demand.
price
P
Q
S
D
P
Q
D1
P1
Q1
Pepsi
What happens if P changes from $7 to $8?
Q
$9
2
8
3
7
5
6
9
D
The ___________ ___________ changes, not ____________.
Pat $7 people would demand _____ rather than _____
Quantity Demandeddemand
58
at $9 people would demand _____ rather than _____2
4D1
this is a shift in demand
But you can shift demand....meaning that
Let’s say Laura started a lanyard business b/c all the students at her school had to wear id’s. She generally priced them around $4.00 each. 23 of 40
What can shift demand?
Let’s say that with all the new homes, there are 100 additional students (consumers) at CHS. What will happen to demand for Laura’s lanyards at the same prices?
P
Q
S
D
P
Q
D1
P1
Q1
AFTER shifting demand, then tell us, what happens to P & Q?
hold off on note-taking
P
Q
S
D
P
Q
D1
P1
Q1
This is why supply & demand are important. The curves themselves don’t matter – it’s where they ____________.
So from this graph when D shifted P ____ & Q ____
Their intersection is called ______________ and it tells us the market-clearing __________ & __________ at which all products will be bought & sold.
intersect
equilibrium
price quantity
What can shift demand?
Harkins opens 2 new theaters in Chandler and employs even more CHS students at a higher wage of $7.30/hour. What happens to demand?
P
Q
S
D
P
Q
D1
P1
Q1
What happens to P & Q?
P & Q
What can shift demand?
Laura has been selling for $4.00 and decides to raise the price to $6.00. What happens to demand?
P
Q
S
D
P
Q
P1
Demand does NOT shift. P does not shift demand. P is movement along the demand curve. Q1
P
Q
S
D
P
Q
D1
P1
Q1
What can shift demand?
Laura wouldn’t let the 3 most popular cheerleaders copy her math homework. Now they refuse to wear the lanyards and make fun of people wearing them. What happens to demand?
What happens to P & Q?
P & Q
P
Q
S
D
P
Q
D1
P1
Q1
What can shift demand? Laura has been selling lots of lanyards that the market-clearing price of $4.00. Then the CHS administration decided to permit students to wear their ID’s on clips as well as lanyards. Business-minded Ben started selling metal clips at $1.00 each during lunch. What happens to the demand for Laura’s lanyards?What happens to P & Q?
P & Q
What can shift demand? Lots of students like to also buy plastic pockets for $1.50 from the book store to hold their ID’s to wear along with Laura’s lanyards. Suddenly Laura saw the price of her lanyards drop from $4 to $2. What happens to the demand for plastic pockets?
P
Q
S
D
P
Q
D1
P1
Q1
What happens to P & Q of plastic pockets?
P & Q
Plastic Pockets
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What can shift demand? The CHS administration feels guilty for making students wear their ID’s and the high cost involved. So the Administration decides to subsidize the cost of lanyards and gives students $1.00 to help them pay for each lanyard. What happens to demand?
P
Q
S
D
P
Q
D1
P1
Q1What happens to P & Q?
P & Q
P
Q
S
D
P
Q
D1
P1
Q1
What can shift demand?
A lot of gossipy students got wind of Laura’s plans to drop her price in half starting next week since it’s near the end of the school year. What happens to the demand for Laura’s lanyards this week?
What happens to P & Q?
P & Q
Variables that Shift Demand:
Number of consumers
Income (Y)Normal Goods
Preferences / Tastes
Related products price of Complements
Expectedfuture P by consumers
Subsidies / Taxes
N
I
E
P
R
S
Inferior Goods
future Y by consumers
price of Substitutes
resume note-taking
Income--Normal Goods
Income--Inferior Goods
As consumers’ income (Y) goes up demand fornormal goods increases. As consumers’ Ygoes down, demand for normal goods decreases.
As consumers’ income goes up demand forinferior goods decreases. As consumers’ Ygoes down, demand for inferior goods increases.
IncomeNormal GoodsIInferior Goods
Make sure you can correctly draw the graphs illustrating a shift in demand.
P
Q
S
D
P
Q
D1
P1
Q1
lanyardsP
Q
S
D
P
Q
D1
P1
Q1
lanyards
Note the elements of an acceptable IB / AP graph:
P
Q
S
D
P
Q
D1
High-Definition TV’stitle of graph
dotted line to show where point is on y & x axis
x axis labeled
y axis labeled
P1
Q1
Note the elements of an acceptable IB / AP graph:
P
Q
S
D
P
Q
D1
High-Definition TV’s
equilibrium P & Q labeled
shifts in curves noted with arrows & new color ink
P1
Q1
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Note the elements of an acceptable IB / AP graph:
P
Q
S
D
P
Q
D1
P1
Q1
High-Definition TV’s
changes in P & Q noted with arrows & new color ink
new numbers for P & Q labeled P1 & Q1
In English pubs, ale is ordered by pints and quarts. So in old England, when customers got unruly, the bartender would yell at them to mind their own pints and quarts and settle down. It's where we get the phrase . . .
“Mind your P's and Q's."
classwork activity
AP workbook p. 19 & 20
10 min
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