Announcements. Quiz #4 next class:
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1 Day #14 3/13-14
2 Announcements Quiz #4 next class: Ch. #10, Law of supply and supply Ch. #11, Price and Quantity Equilibrium How non-price changes impact price and quantity equilibrium: check organizer Shortage and surplus
3 Corny Jokes 1. Why is your nose in the middle of your face? BECAUSE IT S THE SCENTER! 2. Why shouldn t you go into business with a tree? THEY TEND TO BE SHADY! 3. Do you want to hear a joke about pizza? OKAY BUT IT IS A LITTLE CHEESY!
4 Review: Ch. #11 and #11 Organizer 1. If incomes for buyers decline, what is the impact on price and quantity equilibrium? 2. Assume the resource prices used in the production of a product declines. What is the impact on the price and quantity equilibrium? 3. Assume the price of a subsitiute good declines for buyers. What is the impact on price and quantity equilibrium? 4. Assume the price of a complementary good declines for buyers. What is the impact on price and quantity equilibrium? 6. If productivity / technology declines for producers, what is the impact on price and quantity equilibrium? 7. What is shortage? 8. Why does price increase from a shortage? 9. What is a surplus? 10. Why does the price decrease from a surplus?
5 Practice
6 Practice
7 The Invisible Hand Self-interest Competition Markets are coordinated by these two concepts
8 Ch. #12: The Role of Price in a Mixed Market Economy (*add to last impact) Organizer / process Signals to Consumers: 1. Substitutes (buy more or less) Producers: 1. Become more efficient Resource prices (try and lower prices produce cheaper or use cheaper substitute)
9 Ch. #12: The Role of Price in a Mixed Market Economy (*add to last impact) Signals to Consumers: 1. Substitutes (buy more or less) Producers: 1. Become more efficient Resource prices (try and lower prices produce cheaper or use cheaper substitute) Substitutes: Higher price of price of substitute= incentive to buy lower priced product Higher price of price of substitute= incentive to buy lower priced product Vice versa Resource prices: Higher priced resources = incentive to find a lower priced substitute for the resource Or cut costs elsewhere
10 Stand and share 1. How do price changes coordinate markets? 2. How does price act like a signal about incentives to buyers of substitute goods? 3. How does price act like a signal about incentives to sellers about resources used in production? 4. How does this (your answer in #3) demonstrate that individuals (and businesses) act in self-interest and the invisible hand?
11 Practice Directions: Follow the specific directions for each question. 1. What is the impact on the price and quantity equilibrium of coffee due to the statement below: Assume there is bad weather in the coffee producing regions of the world. 2. Based on your answer in #1, how would the price change of coffee send a signal to each of the following markets? Be specific. a) A substitute market for coffee b) The producers of coffee
12 Practice Directions: Follow the specific directions for each question. 1. What is the impact on the price and quantity equilibrium of gasoline due to the statement below: Assume the demand for SUVs decreases. Gas is a complementary good for buyers of SUVs. 2. Based on your answer in #1, how would the price change of SUVs send a signal to each of the following? Be specific. a) A substitute market for gasoline b) The producers of gasoline
13 One game to engage them all
14 Grudge ball rules 1. Each team starts with 20 X s 2. A question will be asked and each team will quietly discuss the answer and write in on their dry erase board. 3. When asked show your answer. 4. Correct answer: allowed to remove two (2) X s from any team or teams. a. You have the option to shoot to increase the number of X s you are eligible to remove. b. First line: remove an additional remove two (2) X s from any team or teams. c. Second line: remove an additional remove three (2) X s from any team or teams. a. And you get to add an X to your team. 5. You can win your way back in by answering a question right and making a basket from the closer line. a. First line: add one (1) X to your team b. Second line: add two (2) X s to your team
15 Grudge Ball #1 Draw a correctly labeled graph showing the impact on the price and quantity equilibrium from the following situation in the shoes market. Assume the cost of leather rises. It is a resource used in the production of shoes.
16 Grudge Ball #2 Draw a correctly labeled graph showing the impact on the price and quantity equilibrium from the following situation in the market for Boeing commercial airplanes. Assume Boeing and Airbus are competitors. The price of a Airbus planes rises.
17 Grudge Ball #3
18 Grudge Ball #4 Assume supply and demand at equilibrium. Assume the supply curve shifts to the left. The immediate effect would be A)A shortage. B) A surplus. C) No change in supply. D)A dot inside the production possibilities curve.
19 Grudge Ball #5 According to the law of supply, a decrease in price will (assume costs are constant) affect profit and quantity supplied in which of the following ways? A. Decrease profit and increase the quantity supplied. B. Decrease profit and decrease the quantity demanded. C. Decrease profit and decrease the quantity supplied. D. Decrease profit and increase the quantity demanded.
20 Grudge Ball #6 A possible explanation for the change in the graph is a(n) A. Decrease in the price of the product. B. Bad or unfavorable weather. C. An increase in the productivity of a resource used in production. D. Decrease in income of buyers.
21 Grudge Ball #7 A possible explanation for the change in the graph is a(n) A. Decrease in the price of the good for buyers. B. Decrease in the price of a substitute good for buyers. C. Decrease in the price of a complementary good for buyers. D. Decrease in the future price for buyers.
22 Grudge Ball #8 The equilibrium price is A. $4 B. $3 C. 70 D. 40
23 Grudge Ball #9 A surplus would exist at which of the following prices? A. $4 B. $3 C. 100 D. $2
24 Grudge Ball #10 Assume the price equilibrium increases and the quantity equilibrium decreases. A potential cause could be A. An increase in productivity of workers used in production. B. A decrease in the price of oranges, a perfect substitute for apples. C. A decrease in the price of a complementary good for buyers of apples. D. Bad or unfavorable weather.
25 Grudge Ball #11 When a shortage occurs A. Buyers compete and bid the price up. B. Buyers compete and bid the price down. C. Sellers compete and bid the price up. D. Sellers compete and bid the price down.
26 Grudge Ball #12 Assume the price of sedans, a perfect substitute for buyers of SUVs, rises. What is the impact on price and quantity equilibrium?
27 Grudge Ball #13 An inverse relationship between the quantity demanded and price is called the law of: A. demand. B. increasing returns. C. market clearing. D. supply.
28 Grudge Ball #14 Which of the following examples illustrates the law of demand? A. An increase in tuition encourages more students to enroll in college because the quality of education has risen. B. Consumers buy more personal computers because prices have fallen. C. Oil companies drill for new sources of oil because oil prices are higher. D. Fewer people play golf because incomes are lower.
29 Grudge Ball #15 When the price of lamps increases, the: A. supply increases. B. quantity supplied increases. C. supply decreases. D. quantity supplied decreases.
30 Grudge Ball #16 If the price of a resource increases, you would expect the: A. supply to increase. B. quantity supplied to increase C. quantity supplied to decrease. D. supply curve to shift to the right.
31 Grudge Ball #17 A factor that may have changed supply from is: A. better technology in the production of gasoline. B. increased demand. C. higher resource prices. D. increased prices of substitutes for gasoline.
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