Transcript The Price System

Everything Demand and Supply




OPEC
Members
Cartel
More oil is
being
released
Drives down
prices

Compromise or balance


Between consumers and producers
Between demand and supply





Information
Incentives
Choice
Efficiency
Flexibility

Information


Incentives


To participate in the market mostly based on price
Choice


Ability to gather information to make informed decisions
– how much to make/relative worth of a good
Choice of products supplied – competition
Efficiency
Wise use of resources
 Efficiency – movement of information


Flexibility

Ability to deal with change – adjusted prices

Externalities
All costs and benefits not
accounted for
- negative = pollution
- positive = income from
Palmer H.S.


Public Goods


Fire, police, schools
Instability
Flexibility results in
changes


The amount of a good or service that a
consumer is willing and able to buy

At a given price and given time

The quantity of a
good or service that
consumers will buy
varies inversely with
the price of the good
or service
QD
P
P
QD

The amount of a good or service that seller are
willing and able to offer for sale
 At a given price and given time

The quantity of a
good or service that
will be offered for sale
varies in direct
relation to the selling
price
P
P
QS
QS


Stand up!
S and D Posse
D
D<S - Surplus
S
P
-Market
Clearing Price
-Equilibrium
S<D - Shortage
Q
Forces that influence demand other
than price.
Pocket Like Its Hot

Consumer tastes and preferences


Market Size


The size of the population
Income


What people like and don’t like
The amount of money people have
Prices of Related Goods

Substitute goods
 Similar goods (peanut butter/Almond butter

Complementary goods
 Goods used with another good (Iphone/protective case)

Consumer Expectations


Anticipation of a change in the money you have
Anticipated price change
INCREASE IN DEMAND
DECREASE IN DEMAND
D2
D1
D1
Shifts to
the right
Shifts to
the left
D2
P
P
Q
Q

Directions:



Read the problem
Identify the determinant
Draw the shift.



To stimulate the economy the US government
announced that all tax payers will receive an
additional $5,000 deductible on their 2014
taxes.
There is a 10 for 10 sale on Doritos at King
Soopers. How would this change the demand
curve for the Kroger Brand flavored corn
chips?
Victoria Secret airs its annual fashion show on
December 9th. How will this impact the
demand for VC products.


Christy Sports is running a ½ off sale on all
2013 snowboards. What impact will this have
on the demand for snowboard boots that they
have in stock?
Today, the front page of the newspaper read,
“Recording artist, Taylor Swift, busted for
providing funds to terrorist groups in
Germany, Syria, and Pakistan. Groups had
plans to use weapons against the U.S. with the
aid.” How does this impact the demand for
Taylor Swift CDs?

Change in the factors of production (resources)


Any price change for a resource increases or decreases a
business’s production costs
Government Tools
Taxes: required payment of money to the government to
help fund government services
 Subsidies: payments to private businesses by
government.
 Regulations: rules on how businesses can conduct
business.


Technology

Makes production more efficient and less expensive

Competition


Competition tend to increase supply
Prices of Related Goods

Prices of related goods can affect the supply of
another product
 Substitute
 Complementary

Producer Expectations

Decisions based on expectation of future income
INCREASE IN SUPPLY
DECREASE IN SUPPLY
S2
S1
S1
S2
P
P
SHIFTS
RIGHT
Q
SHIFTS
LEFT
Q


Last year Levi’s came out with a line of jeans made
with organic cotton. In October the workers in
India who harvested the organic cotton went on
strike to fight for increased wages and won. Draw
the shift in supply of Levi’s organic line.
There is a market shortage of gasoline and the
government is expected to help with the crisis. The
government decides to provide a cash incentive to
any refinery that is willing to produce more gas.
Draw the shift in supply of gasoline.


Virus has always produced their snowboard
line by hand. This year they decided to change
their production to the assembly line method.
Draw the shift in supply o f Virus snowboards.
Farmers all over the U.S. traditionally grew
wheat. Over the past two years auto companies
began making more alternative-fuel
automobiles that use ethanol. Draw the supply
shift for corn grown by U.S. farmers.


Last month there were three burrito shops
downtown. Over the past three weeks two for
the burrito shops closed down. Draw the shift
in the supply of burritos.
The Denver Nuggets are on the winning streak
that is expected to continue through the season.
Draw the supply curve and shift for Nuggets
jerseys.

Increase in Demand
D1
D2
S

Result


Price Increases
Quantity Increases

Decrease in Demand
D1
D2
S

Result


Price Decreases
Quantity Decreases

Increase in Supply
D

S1
Result

S2

Price Decreases
Quantity Increases

Decrease in Supply
D
S2
S1

Result


Price Increases
Quantity Decreases

Identify the determinant




Is it a determinant of supply or demand?
Draw the graph
Draw the shift that occurs
Identify how it will impact the equilibrium

P? Q?


It is reported in the news that Kelly Clarkson is
associated with an extremist religious group
who advocates for pluralism and human
sacrifice. Her character is questioned and her
popularity begins to fade.
Horizon milk company introduces a
strawberry milk. People desire fewer hormones
than are present in Nesquik.


Due to a recent hurricane the tomato fields in
Florida were demolished. How will this change
the market of canned tomato?
The Toms manufacturer invested in the
company by buying new equipment with
quicker technology.