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Bell Ringer #6 – 10/18/10

Bell Ringer #6 – 10/18/10. A hurricane has caused a major power outage in City X.  The demand for ice increases, yet the supply decreases. Why do you think the demand for ice probably increased? Why might the ice supply have decreased?

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Bell Ringer #6 – 10/18/10

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  1. Bell Ringer #6 – 10/18/10 A hurricane has caused a major power outage in City X.  The demand for ice increases, yet the supply decreases. • Why do you think the demand for ice probably increased? • Why might the ice supply have decreased? • Would you be concerned about buying ice in a power outage?

  2. Ice in high demand? • People use ice to preserve food by filling coolers or freezers & demand increases.  • The supply of ice may decrease, since many local ice producers won't be able to make ice without power. 

  3. Why is the ice in demand? • Keep groceries from spoiling • Keep sodas cool • Keep prom corsage fresh • Keep fishing bait cold • Keep medicine fresh • Keep milk from spoiling

  4. What about the equilibrium point? • The demand curve will shift to the right since people will want ice for freezers.  • The supply curve will shift to the left since it requires power to produce ice. • This combination of an increase in demand and decrease in supply causes the equilibrium price of ice to go up.

  5. Ice Price? • Suppliers may raise prices under the rare high demand. • Higher price will encourage suppliers to use more costly means to bring ice to market. Ex: using generators to make ice, or by trucking ice in from other areas.    • Supply will eventually increase. (L of S)

  6. The Price System • The Price System allows producers and consumers to balance supply and demand. • This provides the following benefits: • Information • Incentives • Choice • Efficiency • Flexibility

  7. Homework • Read Ch 5, Section 1 – “The Price System” • Answer questions 1, 2, 3ab on page 102

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