Transcript An Introduction to U.S. Markets

An Introduction to U.S.
Markets
 Markets
 How are prices set?
The Law of Demand
 As the price of goods and services
INCREASES, buyers may demand LESS
goods and services.
 As the price of goods and services
DECREASES, buyers may demand
MORE goods and services.
The Law of Supply
 As the price of goods and services
INCREASES, producers may offer MORE
goods and services.
 As the price of goods and services
DECREASES, producers may offer LESS
goods and services.
Price Setting
 The price is set where demand and supply
meet.
Equilibrium Price
 The equilibrium price is the point where
quantity supplied meets quantity
demanded. This is the point where there
is no incentive to move.
Price
Equilibrium Price
Supply = demand
Quantity
When Demand Rises
 Shifts demand curve to the right
 Price rises, and quantity demanded rises
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P'
D'
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P
Do
Qo
Q'
When Supply Rises
 Shifts Supply Curve rightward
 Price falls, Quantity demanded will rise
S
S'
P'
A
B
o
P
D
Qo
Q'
What happens to the DEMAND for bubble
gum if research proves that each gum ball
can increase I.Q.?
Answer: Demand increases
price for bubble gum rises
 What happens to the SUPPLY of
toothpaste if toothpaste workers go on
strike?
 Answer:
Supply of toothpaste falls
Price of toothpaste rises
 What happens to the price of strawberries
if a winter freeze damages the crop?
 Answer:
Price of strawberries rises
 What will happen to the SUPPLY of candy
bars if new technology is developed which
makes it easier for chocolate to be mixed
with caramel?
 Answer:
Supply will increase
Price will fall
 What will happen to the DEMAND for inline roller skates if a new roller park opens
in your neighborhood?
 Answer:
Demand for skates increases
Price for skates rises
 What will happen to the PRICE of
diamonds if any 8th grader can produce
them at school?
 Answer: Price of diamonds will fall
 What will happen to the DEMAND for
butter if the price of margarine falls?
 Answer: Demand for butter decreases
 What will happen to the DEMAND for
cereal if the price of milk increases?
 Answer: Demand will decrease