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We will be using Cornell Note Taking Format Today! Smile and “Own the Day! Take one step at a time to Success in Economics class! Unit Two: Learning Objectives: North Clackamas School District Social Studies Priority Standards: • HS.51 (A): Explain how supply and demand represents economic activity and describe the factors that cause them to shift. Lesson Six: Daily Learning Target I Can define and explain in writing the following key Economic concepts: Equilibrium Disequilibrium Excess Demand Excess Supply Price Ceiling Price Floor 1. An increase in resource cost results in a(an) decrease ___________in supply of tablets. 2. An increase in # of suppliers results in a(an) _____________in supply of autos. increase decrease 3. A decrease in the number of producers of computers will ___________ the supply of computers decrease in 4. An increase in the price of wheat results in a(an) __________ supply of the alternative good corn. increase in supply of of 5. A technological breakthrough results in a(an) _________ broccoli. 6. If oil suppliers expect oil prices to rise dramatically in one month it will result in a(an) __________ decrease in supply of oil now. 7. A decrease in business taxes will result in a(an) __________ increase in the supply of a commodity. 8. If the government increases subsidies to milk farmers, it will result in a(an) increase ________ in the supply of milk. 9. If steel producers have to pay more in worker wages, then the supply of decrease steel will __________. S D1 P P (A) D S P (B) D S1 P (C) RATNEST (D) S1 Combining Supply and Demand D1 D2 A “D” for flag after 9/11 D1 S B S P1 P1 Four Possibilities D D C S1 S2 $1.85 Q1 Q2 D S1 $1 Do you notice the point where supply and demand intersect? Equilibrium When creating a demand curve and a supply curve, there is a point where the curves intersect. This point is the equilibrium point. Equilibrium occurs when the quantity demanded equals the quantity supplied. A market is stable at equilibrium. $1200 QS=80 Shortage QD=160 $300 40 160 Q $40 QD=10 Surplus QS=30 $10 10 40 Q $4 QD=40 Surplus QS=80 $1 20 80 Q $800 Shortage $200 20 80 Q If a seller has seven donuts on the shelf at $1 per donut, and consumers only want seven donuts at that price, then the market is at equilibrium. Disequilibrium A market is at disequilibrium when the quantity demanded does not equal the quantity supplied. If quantity demanded is greater than quantity supplied, excess demand occurs. If quantity supplied is greater than quantity demanded, excess supply occurs. Low prices encourage consumers. Low prices can create excess demand. Excess Demand Excess demand occurs when the actual price is lower than the equilibrium price. Low prices encourage demand. To fix this problem, prices must be raised. If every parent wants to purchase this toy for the holidays, excess demand can occur. However, if no one is buying, then excess supply occurs. Excess Supply Excess supply occurs when quantity supplied is greater than quantity demanded. The actual price is higher than the equilibrium price. To fix this problem, prices must be lowered. The day after Valentine’s Day, consumers will not pay high prices for Valentine’s candy. Price Ceiling A price ceiling is the maximum price that can be legally charged for a good or service. The government interferes with market equilibrium when it creates a price ceiling. Rent control is an example of a price ceiling. Rent control is an example of a price ceiling. Price Floor A price floor is the minimum price that can be legally charged for a good or service. The government interferes with market equilibrium when it creates a price floor. Minimum wage is an example of a price floor. The minimum wage is an example of a price floor. Dollar Price D S QD QD QS E 120 =120 QD=QS Quantity (units of any good or service) 4 QS & QD (Thousands) SUPPLY PRACTICE: WHEN YOU ARE FINISHED….Skim through Chapter 5 (page 141-147)Answer questions 3-10 (page 147) on a piece of notebook paper and turn directly into me today. THIS CAN BE DONE IN PARTNERS! Pick up todays graphing worksheet from me. Work on this independently. Turn directly into me. I want to personally check your level of understanding on these concepts.