Transcript Prices! - Doral Academy Preparatory

Arianna Rodriguez
Ana Selman
Luis Garced
Chris Hameed
Period: 5
(First part)
Balancing the market!*
 Demand Schedule shows how much are costumer meant to buy
at different prices.
 A Supply Schedule shows how much are sellers meant to sell at
different prices.
 Equilibrium is the balance between demand and supply when
they come together. It’s the point of balance between price and
quantity.
 Equilibrium can be represented by a demand & supply graph.
 If the market price or quantity supplied is anywhere but at the
equilibrium point, the market is in a state of disequilibrium.
 Excess demand occurs when quantity demanded is more than
quantity supplied.
A low price in a market encourages buyers and discourages sellers.
As long as there’s excess demand and the quantity demanded
exceeds the quantity supplied; suppliers will keep raising the price.
Price ceiling: maximum price that can be legally charged for a
good.
Price floor: minimum price for a good or service.
The government places price ceilings on some goods that are
considered essentials and may become way too expensive for some
consumers.
Rent control: a price ceiling placed on rent. It reduces the quantity
and quality of the houses, it may help some households owners, but
harm others with poor requirements.
Price ceiling
Price floor
(Second part)
Cost of Price ceilings!*
-WHEN PRICES OF HOUSEHOLD ARE NOT BALANCED OUT THEY
DIVIDE IT AND HALF WILL GET THE APARTMENT AND THE OTHER
WILL NOT.
-GOVERNMENT HELPS OUT IN THE RENT.
-THE ONLY WAY YOU CAN GET A RENT-CONTROLLED HOUSEHOLD IS
IF FAMILY MEMBERS PASS IT DOWN TO YOU.
-IN THE 1900’S NEW YORK PASSED A LAW TO NOT ALLOW
GOVERNMENT TO HELP THE WEALTHIEST PEOPLE WITH RENTCONTROL.
* MINIMUM WAGE- THE MINIMUM
PRICE SOMEONE CAN PAY A WORKER
FOR THE WORK THEY DO.
-IF PEOPLE ARE ALLOWED TO RAISE THE
PRICES UP FOR THE COST OF A HOUSE
THEN THE AMOUNT OF HOUSES OR
APARTMENTS THAT WOULD BE
SOLD/RENTED WOULD DROP.
*PRICE FLOORS
 THE PRICE THAT THE GOVERNMENT SETS FOR A GOOD OR
SERVICE.
 PRICE FLOORS ARE MOSTLY KNOWN FOR THE MINIMUM WAGE.
 THE FEDERAL GOVERNMENT GIVES A LEVEL FOR THE MINIMUM WAGE;
AND THE STATES BRING IT HIGHER.
 THERE ARE MORE PEOPLE LOOKING FOR WORK THAN PEOPLE
ACTUALLY HIRING.
 PRICE FLOORS IS USED FOR EVERYTHING; MOSTLY FOR FARM
PRODUCTS.
Equilibrium!*
In economy, the markets’ price and
quantity move generally to equilibrium
levels, because when there is an excess
of demand. Then there is raise of price
and the quantity supplied to rise and
the quantity demanded fall and in that
way everything becomes equal or in
equilibrium. The same happens
backward when they cut prices.
Understanding a shift in supply.
 When there is a new electronic device, which
just came out, its price is extremely high. But
when the time passes and there are newer
electronic devices then the price of the old one
goes down.
Finding a new equilibrium.
 At the beginning the prices of a production are high, but when it decreases its price
then the demand gets higher.
Changing equilibrium.
 When there is an old electronic device, its price is always changing and going
down. And its production increases. People who want to sell this old product are
always looking for new equalities and methods of production change, which make
them to sell and move this product out of stores.
 There are lots of facts affecting curves. If those facts cause less production then
the prices will get higher and people would buy less, which would decrease the
demand of the product.
 Unexpected changes on demand disturb the equilibrium of
market. This happens mostly in November because of a new
toy’s creation.
The problem of excess demand
 When the demand exceed, it causes shortage. It also causes search cost it would
be expensive because you re looking if what you want is in another place.
Return to equilibrium.
 When there is shortage and you want to buy a
product you have to pay extra money in order to have
a kept product from the next shipment, which increases
prices and maintain equilibrium between demand and
price.
A fall in demand.
 As fast as the demand exceed as fast as it falls, which
cause less demand and lower prices.
(First part)
Prices!*
Prices in the Free Market
 Prices are involved in all parts of the
economy.
 They help move the three factors of
production into the hands of producers.
 Then with prices producers can sell to
consumers.
 People are always finding ways to get their
goods for cheaper prices.
The Advantages to Prices
• Without prices there would be bartering in which people
• would be buying and selling with any kinds of objects.
– This way all goods would be traded at uneven values.
– Because of this producers won’t know what they should be producing.
– Without prices supply and demand would be irregular an all goods would either
be
– overproduced or under produced.
• The way prices work can be simplified in two ways.
– If an object is selling for a high price it tells producers that the good is in demand.
– If it is selling at a low price it usually means it is either overproduced or it is no
longer in demand.
• Price can also be malleable in a sense.
– If a good is in too high a demand then its price will go up to subdue excess
demands.
– If the good has an excess of supply then the price can be lowered to eliminate the
supply.
• The price system requires no planning.
– Differently from a centrally planned economy a system working with prices costs
nothing to startup or maintain.
A Wide Choice
of Goods
• With different prices come different kinds of goods. In command economies because
the government tries to limit spending they restrict production to only certain kinds of
goods.
• In command economies everything is available for very cheap but because of this
things were hard to find.
– With this difficulty came shortages of goods and when goods were found people
had to wait for very long to even have a chance at this. The U.S. found a similar
problem when it temporarily controlled prices in WWII but it wasn’t as severe.
– Even though rationing systems work to an extent people sometimes ignored the
government to make some extra income on the side.
• When this kind of thing happens it is referred to doing business on the black
market. As much as it is discouraged it is something that always comes as a
consequence of rationing.
(Second part)
Prices!*
Efficient Resource
Allocation
• The free market allows all the factors
of production to be used for their best attribute.
• Market System
- The system that allows consumers to get the goods they want the
most by its freedom to change prices.
• Price-Based System
- The system that basically changes the resource use if consumers demand
another good.
• When the market & price-based systems because of the consumer’s
interests, no one is personally changing and it just happens
E.R.A.
(continued)
• Most efficient way to use our society’s scarce resources
1. Resource owners sell their resources to the person/group who gives
them the highest price.
2. Because of that, the person/group will usually become a big company
and provide the best goods.
3. The result of all this is that the best resources will be given to the people.
Prices and the Profit Incentive
• When demand exceeds supply, prices skyrocket causing consumers to buy
expensive things causing more profit for the resource owners.
• The Wealth of Nations
- Adam Smith wrote this novel in 1776
- States that successful companies become big by providing goods that are
the most popular among consumers.
• Market Problems
1. Imperfect Competition
2. Spillover Costs
3. Imperfect Information
Market Problems
• Imperfect Competition
- Causes the prices to be expensive, and that would change a lot of decisions
between consumers.
• Spillover Costs
- “Externalities”
- Since the makers of goods just have to produce it, the prices they give to
markets are low. Since the market has the price incentive, consumers tend to
pay the spillover cost.
• Imperfect Information
- When companies don’t give out enough information to a consumer.
- Causes consumers to make poor decisions.
 http://www.shuttestock.com
 http://www.albusiness.com
 http://www.flickr.com
 http://www.joystiq.com
 Economics Book