Name: Period: 5. Monday Tuesday Wednesday Thursday Friday 27 E. *Mandatory Fair Meeting 6pm. Assignment Your Score Total Points Possible

Transcription

1 Ms. King BishopAgEd.weebly.com Name: Period: 5 Week: Dates: 1/18 2/5 Unit: How Markets Work Monday Tuesday Wednesday Thursday Friday 18 No School 19 E 20 O *Basic Principles of Free Market *Types of Goods Poster FFA Meeting 6pm 21 E 22 O *Demand Bishop Gone 25 E 26 O 27 E 28 O 29 E *Demand *Mandatory Fair Meeting 6pm *What is Supply? *Local Job Interview Contest State Degree Apps due 1 O *Costs and Changes in Supply *Elasticity 2 E 3 O *Elasticity 4 E 5 O *Unit Assessment & Packet due *Record Books Assignment Your Score Total Points Possible Free Market Notes 10 Benefits of Free Market *Worksheet 17 Demand Curve Notes 20 Shifts in Demand *Worksheet 26 Supply Curve Notes 20 Elasticity Notes 20 Elasticity Reading and questions 30 TOTAL 143 Upcoming Activities/Announcements 1/20 FFA Meeting 6pm Little Theater 1/22-23 MFE/ALA Conference in Monterey - Bishop/Clement/King gone 1/27 Mandatory Parent/Exhibitor Fair Meeting 6pm S1 1/28 Job Interview Local Chapter Contest 4pm S1 1/29 State Degrees Due

2 Basic Principles of Free Market

3 26 Chapter 3 Section 1: Guided Reading and Review Section 1: Guided Reading and Review Benefits of Free Enterprise CHAPTER 3 A. As You Read As you read Section 1, supply the missing information about the American market system in the spaces provided. Free Enterprise Basic principles: Consumer Basic Roles: Government Basic Roles: B. Reviewing Key Terms Complete each sentence by writing the correct key term in the blank. 14. When individuals decide to put their house up for sale, they are exercising their. 15. Farmers who feel they need a private organization to influence public policy in their behalf might form a/an. 16. Nutritional values printed on candy wrappers or milk cartons are required under. 17. The concerns of the public as a whole make up the.

4 Chapter 4:Understanding Demand Demand Market Demand Curve Demand Schedules Price per slice (in dollars) Slices of pizza per day

5 Demand

6 Demand

7 Demand Summary (briefly describe the main concepts, major points)

8 Many ew inventions he way Americans ved in the 1920s. The opment of radio, which connected the lives o millions across the untry and around the world, was a true turning during the productive. nodern life flocke Th new on effi made fac Section 2: Guided Reading and Review Shifts of the Demand Curve CHAPTER 4 A. As You Read As you read Section 2, answer the following questions in the space provided. 1. What condition must exist to make a demand curve accurate? 2. What happens to a demand curve when there is a change in factors (other than price) that can affect consumers decisions about purchasing the good? 3. How does consumer income affect the demand for normal and inferior goods? 4. How does consumer expectation affect demand for certain goods? 5. Explain how the baby boom generation affected demand for certain goods. 6. How are consumer tastes and advertising related? 7. Explain how demand for a good can affect demand for a related good. 8. Give an example of a substitute good. B. Reviewing Key Terms Match the definitions in Column I with the terms in Column II. Write the letter of the correct answer in the blank provided. Prentice-Hall, Inc. Column I 9. all other things held constant 10. goods whose demand increases as consumer income increases 11. goods whose demand falls as consumer income increases 12. goods that are bought and used together 13. goods that are used in place of one another Column II a. normal goods b. substitutes c. ceteris paribus d. inferior goods e. complements 4 Chapter 4 Section 2: Guided Reading and Review

9 Chapter 5: Understanding Supply Cue Column Supply Price As price increases Supply Quantity supplied increases Price As price falls Supply Quantity supplied falls Market Supply Schedule Market Supply Curve Price per slice of pizza Slices supplied per day 3.00 $.50 1,000 Price (in dollars) Output (slices per day)

10 Supply

11 Supply Summary (briefly describe the main concepts, major points)

12 Elasticity Cue Column Elasticity

13 Elasticity

14 Elasticity Summary (briefly describe the main concepts, major points)

15 This does not mean that the demand for an individual producer is inelastic. For example, a rise in the price of gasoline at all stations may not reduce gasoline sales significantly. However, a rise of an individual station s price will significantly affect that station s sales. Unitary Elasticity If the elasticity coefficient is equal to one, demand Elasticity is unitarily elastic of demand as shown is an in important Figure 3. variation For example, on the a 10% concept quantity of demand. change divided Demand by can 10% be price change classified is one. as This elastic, means inelastic that a one or unitary. percent change in quantity occurs for every one percent change in An elastic price. demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. The formula for computing elasticity of demand is: Figure 3. Unitary elasticity Elasticity of Demand File C5-207 July Close substitutes for a product affect the elasticity of demand. It another product can easily be substituted for your product, consumers will quickly switch to the other product if the price of your product rises or the price of the other product declines. For example, beef, pork and poultry are all meat products. The declining price of poultry in recent years has caused the consumption of poultry to increase, at the expense of beef and pork. So products with close substitutes tend to have elastic demand. (Q1 Q2) / (Q1 + Q2) (P1 P2) / (P1 + P2) Figure 1. Elastic demand If the formula creates a number greater than 1, the demand is elastic. In other words, quantity changes faster than price. If the number is less than 1, demand is inelastic. In other words, quantity changes slower than price. If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price. Elastic Demand Elasticity of demand is illustrated in Figure 1. Note that a change in price results in a large change in quantity demanded. An example of products with an elastic demand is consumer durables. These are items that are purchased infrequently, like a washing machine or an automobile, and can be postponed if price rises. For example, automobile rebates have been very successful in increasing automobile sales by reducing price. An example of computing elasticity of demand using the formula above is shown below. When the price decreases from $10 per unit to $8 per unit, the quantity sold increases from 30 units to 50 units. The elasticity coefficient is 2.25.

16 Elasticity example P1 = $10 P2 = $8 Q1 = 30 Q2 = 50 (Q1 Q2) / (Q1 + Q2) = (50 30) / ( ) = 20 / 80 (P1 P2) / (P1 + P2) ($10 - $8) / ($10 + $8) $2 / $18 1 / 4 = 1 x 9 = 9 = / 9 4 x 1 4 Inelastic Demand Inelastic demand is shown in Figure 2. Note that a change in price results in only a small change in quantity demanded. In other words, the quantity demanded is not very responsive to changes in price. Figure 2. Inelastic demand Examples of this are necessities like food and fuel. Consumers will not reduce their food purchases if food prices rise, although there may be shifts in the types of food they purchase. Also, consumers will not greatly change their driving behavior if gasoline prices rise. An example of computing inelasticity of demand using the formula above is shown below. When the price decreases from $12 to $6 (50%), the quantity of demand increases from 40 to only 50 (25%). The elasticity coefficient is.33. Inelasticity example P1 = $12 P2 = $6 Q1 = 40 Q2 = 50 (Q1 Q2) / (Q1 + Q2) = (50 40) / ( ) = 10 / 90 (P1 P2) / (P1 + P2) ($12 - $6) / ($12 + $6) $6 / $18 1 / 9 = 1 x 3 = 3 =.33 1 / 3 9 x 1 9

17 Elasticity Reading Using the above information, answer the following: 1. A 10 percent increase in income brings about a 15 percent decrease in the demand for a good. What is the income elasticity of demand and is the good a normal good or an inferior good? Explain your answer. 2. If the price of a good increases by 8% and the quantity demanded decreases by 12%, what is the price elasticity of demand? Is it elastic, inelastic or unitary elastic?