Transcript D 1

Economics – Chapter 4
Part 1
Everyone knows that
when we teach econ, we
teach supply & demand.
P
why?
S
D
Q
because of what it tells us
Let’s say you have access to the
following resources...
348 N. Arizona Ave
would you produce
why?
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or
Or let’s say you live here ....
and you have access to
these resources....
would you choose to
produce
or
why?
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 father of economics
has something to tell you.
“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
lowest possible price.
the _________
Why can’t he?
Because he has to compete
against all these other
buyers ...
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Leandra would like to
highest
charge the _________
possible price. Why can’t
she?
Buyers competing against each
up
other drive the price ________.
Sellers competing against each
down
other drive the price ________.
Price
Supply
Equilibrium
Price
Demand
Quantity
At equilibrium ....
able
Every buyer willing and ________
to pay the price got the goods &
services he desired.

 Every
seller able to produce at
all
that price was able to sell _______
she wished.
 There
nor
are neither ....
surpluses
too many = ___________
too few = ___________
shortages
Price
Supply
Equilibrium
Price
Demand
At equilibrium ....
Quantity
Did every buyer who wanted one get
one?
 Did every seller who wanted to
produce, produce one?
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
…enjoy 3 different pools…
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…
…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.
Copy this chart onto your paper.
How many of you would be willing to go
on this 3-day weekend if the price were…..
Price
$200
$150
$75
$50
$25
Number of
New Travelers
Quantity
Demanded
Now plot the data on this graph on your paper.
Price
$200
Beach Vacations
$150
$100
$75
$50
$25
5
10
15
20
25
Quantity
Beach Vacations
Price
$200
$150
Note that the demand curve
downward sloping.
is _______________
$100
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$75
$50
$25
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5
10
15
20
25
Quantity
Beach Vacations
Price
$200
To be on the demand curve a
willing
person must be ___________
able
and _________to
purchase the
product or service.
$150
$100
Qd
Note that quantity
demanded is just a point
on the curve.
$75
$50
D
$25
5
10
15
20
is the entire
curve.
25
Quantity
Price
Beach Vacations
$200
$150
$100
Qd
So if you are told there
was a change in price
of beach vacations,
this would be
along
movement _________
the curve.
$75
$50
D
$25
5
10
15
20
25
Quantity
Quantity demanded rises as
price falls, & quantity
demanded falls as price rises,
other things constant.
This would be illustrated by
along
movement _________the
demand
curve.
However, there are 8 variables
price
other than _________
that will
shift demand.
P
Pepsi
S
P1
P
D1
D
Q
Q1
Q
P
at $9 people $9
would
8
demand
7
4 rather 6
_____
2
than _____
What
happens if P
changes from
$7 to $8?
at $7 people
would
D1 demand
8 rather
_____
5
than _____
D
2 3
5
9
this is a
Q shift in
demand
Quantity Demanded
The ___________
___________ changes, not
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.
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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?
hold off on note-taking
P
S
P1
P
D1
AFTER shifting
demand, then tell us,
what happens to P & Q?
D
Q
Q1
Q
This is why supply &
demand are important.
The curves themselves
don’t matter – it’s
intersect
where they ____________.
P
Their intersection is
equilibrium
called ______________
and it tells us the
market-clearing
price & __________
quantity
__________
at which all products
will be bought & sold.
So from this graph

when D shifted P ____

& Q ____
S
P1
P
D1
D
Q
Q1
Q
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
S
P1
P
D1
What happens to P & Q?
P  & Q 
D
Q
Q1
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
S
P1
Demand does NOT shift.
 P does not shift
demand.  P is
movement along the
demand curve.
P
D
Q1
Q
Q
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?
P
S
P
P1
What happens to P & Q?
D1
P  & Q
Q1
Q
D
Q
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?
P
S
P
P1
What happens to P & Q?
P  & Q
D1
Q1
Q
D
Q
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?
What can shift demand?
Plastic Pockets
P
S
P1
P
D1
What happens to P & Q
of plastic pockets?
P  & Q 
D
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Q
Q1
Q
What
The CHS
administration feels
guilty for making
students wear their
ID’s and the high cost
P
involved. So the
Administration
decides to subsidize
P1
the cost of lanyards
P
and gives students
$1.00 to help them
pay for each lanyard.
What happens to
demand?
What happens to P & Q?
P  & Q 
can shift demand?
S
D1
D
Q
Q1
Q
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?
P
S
P
P1
What happens to P & Q?
P  & Q
D1
Q1
Q
D
Q
Variables that Shift Demand:
resume note-taking
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Subsidies / Taxes
N
Number of consumers
I
Normal Goods
Income (Y)
Inferior Goods
Preferences / Tastes
P
E
R
future P by consumers
Expected
future Y by consumers
Related products price of Complements
price of Substitutes
I
Normal Goods
Income
Inferior Goods
Income--Normal Goods
As consumers’ income (Y) goes up demand for
normal goods increases. As consumers’ Y
goes down, demand for normal goods
decreases.
Income--Inferior Goods
As consumers’ income goes up demand for
inferior goods decreases. As consumers’ Y
goes down, demand for inferior goods
increases.
Make sure you can correctly draw the
graphs illustrating a shift in demand.
lanyards
P
P
S
lanyards
S
P1
P
P
D1
P1
D
Q
Q1
Q
D1
Q1
Q
D
Q
Note the elements of an acceptable IB / AP graph:
y axis labeled
P
title of graph
High-Definition TV’s
S
dotted line to
show where
point is on y
& x axis
P
P1
D1
Q1
Q
D
Q
x axis labeled
Note the elements of an acceptable IB / AP graph:
P
High-Definition TV’s
S
equilibrium P
& Q labeled P
shifts in curves
noted with arrows
& new color ink
P1
D1
Q1
Q
D
Q
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Note the elements of an acceptable IB / AP graph:
P
High-Definition TV’s
S
P
P1
new numbers
for P & Q
labeled P1 &
Q1
D1
Q1
Q
D
Q
changes in P & Q noted
with arrows & new color
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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