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Warm up

Warm up. 60. 50. 40. 30. Label Equilibrium, Area where there is shortage and area where there is a surplus. 20. 10. 50. 100. 150. 200. 250. 300. Goal 8. Shifts in the Market . What causes these shifts?. D2. D1. D3. Fads. Demand Shift.

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Warm up

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  1. Warm up 60 50 40 30 Label Equilibrium, Area where there is shortage and area where there is a surplus. 20 10 50 100 150 200 250 300

  2. Goal 8 Shifts in the Market

  3. What causes these shifts? D2 D1 D3

  4. Fads

  5. Demand Shift • When demand increases due to fads, equilibrium price increases. • When fads pass… • good/service turns to SURPLUS • original equilibrium will be restored by lowering price to get rid of surplus.

  6. With a partner…come up with an example for this shift Price D1 D Quantity

  7. With a partner…come up with an example for this shift Price D D1 Quantity

  8. What can decrease demand? • With a partner… • Make a list of goods/services that compete with each other. • These goods must be affected if the others lower their prices.

  9. Substitutes

  10. Compliments • Sometimes… • The increase of price of one object can decrease the demand of another. • For example • If a XBOX 360 price raises from $300 to $400…the demand for XBOX games would decrease. • If the price of hot dogs goes up, the demand for hot dog buns decreases.

  11. The effect of a market shift • Demand Elasticity • Change in price will change demand substantially • Goods with substitutes (wants) • Demand Inelasticity • Change in price does not really affect demand • Rising price of gas is an example.

  12. What Causes these shifts? S2 S1 S3

  13. Reasons for Changes in Supply • Cost of resources • Amount available • Productivity • Technology • Government regulations, taxes, and subsidies • Expectations

  14. Come up with an example for this shift.

  15. Come up with an example for this shift…

  16. How do we control the market? • If gas prices soar to $5.00 per gallon, would you like the government to step in and say “No more!”? • If the equilibrium price of a part time worker was $5.50, would you like the government to step in and say “Pay workers more!”?

  17. Price Ceiling • Set a maximum price for a good/service • Results in a shortage • Price Floor • Set a minimum price for a good/service • Results in a Surplus

  18. Price Ceiling If the government says that the price of gas per gallon cannot exceed $5.00, although the market equilibrium would be $7.00, there would be a shortage due to the companies losing money, This means as a business you cannot afford as much and are indeed losing money. Shortage $7.00 $5.00

  19. Price Floor Surplus If you own a business and have 10 workers, the equilibrium price you should pay would be $5.50, however minimum wage laws state you must pay them at least $7.50 an hour. This means you are paying your workers more money for less work required. $7.50 $5.50

  20. Competition • Essential for market efficiency, growth, and quality while prices decrease. • Perfect competition results in equilibrium.

  21. Characteristics of Competition • Many buyers and sellers • No one person is too powerful • More Companies = Good • Identical Products • Commodies (same product different seller) • Informed Buyers and Sellers • Know their markets! • Find the best deals! • Free market Entry/Exit • Firms/companies must be able to enter and exit markets when they make $ or cannot stay in business

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