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Prices and Equilibrium

Prices and Equilibrium. Mr. Bammel. The monetary value of a product as established by supply and demand. Turn to a partner in the room and have a discussion. Answer the questions: Are prices fair? Should the government help dictate prices?

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Prices and Equilibrium

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  1. Prices and Equilibrium Mr. Bammel

  2. The monetary value of a product as established by supply and demand. • Turn to a partner in the room and have a discussion. Answer the questions: • Are prices fair? • Should the government help dictate prices? • In what situations do you think government should dictate prices? Prices

  3. Prices link the producers and consumers; and allow allocation of goods and services to be smooth and efficient. • Advantages of prices • There is neither a favor in producers, nor consumers • Prices are flexible and allow economy to accommodate change • No Cost in administration • Familiar and easily understood Advantages Prices

  4. What would be done if we did not use price as a means to distribute goods and services? What options exist? Without Price

  5. A system under which an agency such as the government decides everyone’s “fair” share. • People receive Ration Coupons, which is a ticket or a receipt that entitles the holder to obtain a certain amount of a product. • What are all the problems with rationing? Rationing

  6. After reading the information on page 140 about prices as a system, explain in your own words how prices act as a system which tells the market where resources should be allocated. Prices as a System

  7. Take the large piece of paper and fold it in half three separate times to create 8 squares/sections for use of drawing graphs. Graphing Market Demand and Supply Curves

  8. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Use the graph to draw in a point labeled “E” where one would find Market equilibrium. • Explain off to the side what Market equilibrium is and what Price Equilibrium means. Square #1: Market Equilibrium

  9. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Find a price on the graph that would display a surplus of a product. • What is a surplus? • What will tend to happen if a surplus does exist? Square #2: Surplus

  10. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Find a price on the graph that would display a shortage of a product. • What is a shortage? • What will tend to happen if a shortage does exist? Square #3: Shortage

  11. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Use a different color pen/pencil and draw a line representing an increase in Supply. Using the same color pen/pencil, write down what happens to the price and the quantity because of this increase in supply. • Use a different color pen/pencil and draw a line representing an decrease in Supply. Using the same color pen/pencil, write down what happens to the price and the quantity because of this decrease in supply. Square #4: Changes in Supply

  12. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Use a different color pen/pencil and draw a line representing an increase in demand. Using the same color pen/pencil, write down what happens to the price and the quantity because of this increase in demand. • Use a different color pen/pencil and draw a line representing an decrease in demand. Using the same color pen/pencil, write down what happens to the price and the quantity because of this decrease in demand. Square #5: Changes in Demand

  13. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Use the graph to display a Price Ceiling. • Explain what a price ceiling is and what is created by a price ceiling. • Explain the example of Rent Controls and how it must abide by price ceilings. Square #6: Price Ceilings

  14. Draw a graph which has price labeled on the Y-axis and Quantity labeled on the X-axis. Then draw an example Demand Curve and an example Supply Curve in the graph. • Use the Graph to display Price Floors. • Explain what a price floor is and what is created by a price floor. • Explain the example of minimum wage and it must abide by a price floor. Square #7: Price Floors

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