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The Marriage of Supply and Demand Civics Mr. Gibbs  Spring 2009
<ul><li>The Forces of Supply and Demand work together in markets to establish prices.  In our economy, prices form the bas...
SURPLUS <ul><li>If the quantity SUPPLIED is greater than the quantity DEMANDED… then there will be “units” left over. </li...
 
SURPLUS <ul><li>A SURPLUS signals that the price is too high.  </li></ul><ul><li>It tells us that consumers are either unw...
SHORTAGE <ul><li>If the quantity DEMANDED is higher than the amount SUPPLIED – you don’t have any more goods and services ...
 
SHORTAGE <ul><li>A shortage signals that the price is too LOW. </li></ul><ul><li>Producers are unwilling to place goods an...
EQUILIBRIUM PRICE <ul><li>Over time: </li></ul><ul><ul><li>the Surplus forces the price DOWN (law of Demand) </li></ul></u...
EQUILIBRIUM PRICE <ul><li>Once the Equilibrium Proce is found…it tends to stay there until there is a significant change i...
PRICE CONTROLS <ul><li>From time to time, the government will set the price of a product because it might think that the f...
Ceiling and Floor <ul><li>Price Ceiling </li></ul><ul><li>helps the “demanders/consumers” – it is the maximum price that s...
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The marriage of supply and demand

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Transcript of "The marriage of supply and demand"

  1. 1. The Marriage of Supply and Demand Civics Mr. Gibbs Spring 2009
  2. 2. <ul><li>The Forces of Supply and Demand work together in markets to establish prices. In our economy, prices form the basis for economic decisions </li></ul>
  3. 3. SURPLUS <ul><li>If the quantity SUPPLIED is greater than the quantity DEMANDED… then there will be “units” left over. </li></ul><ul><li>These “units” that are left unsold are referred to as a SURPLUS </li></ul>
  4. 5. SURPLUS <ul><li>A SURPLUS signals that the price is too high. </li></ul><ul><li>It tells us that consumers are either unwilling, don’t have the desire, or are unable to purchase these goods and services at the current price. </li></ul><ul><li>Sellers will have to lower prices to increase demand (LAW of DEMAND) </li></ul>
  5. 6. SHORTAGE <ul><li>If the quantity DEMANDED is higher than the amount SUPPLIED – you don’t have any more goods and services to sell </li></ul><ul><li>When you run out of things to sell, and there are still people desiring to, willing to and able to purchase your goods and services…then you have a SHORTAGE </li></ul>
  6. 8. SHORTAGE <ul><li>A shortage signals that the price is too LOW. </li></ul><ul><li>Producers are unwilling to place goods and services into the product market at the current price </li></ul><ul><li>In order to increase the supply, the price will have to rise (LAW of SUPPLY) </li></ul>
  7. 9. EQUILIBRIUM PRICE <ul><li>Over time: </li></ul><ul><ul><li>the Surplus forces the price DOWN (law of Demand) </li></ul></ul><ul><ul><li>The Shortage forces the price UP (Law of Supply) </li></ul></ul><ul><li>Until you find a balance…. </li></ul><ul><li>This balance – when the supply is equal to the demand – is called the “equilibrium price” </li></ul>
  8. 10. EQUILIBRIUM PRICE <ul><li>Once the Equilibrium Proce is found…it tends to stay there until there is a significant change in Supply/Demand (our handouts!!!!) </li></ul><ul><li>Once one of the changes happens – you will have a surplus/shortage… and prices will have to fluctuate until they find the NEW “equilibrium price” </li></ul>
  9. 11. PRICE CONTROLS <ul><li>From time to time, the government will set the price of a product because it might think that the forces of supply and demand are unfair… </li></ul><ul><ul><ul><li>Socialism? </li></ul></ul></ul><ul><ul><ul><li>Might favor the suppliers or the demanders…. </li></ul></ul></ul>
  10. 12. Ceiling and Floor <ul><li>Price Ceiling </li></ul><ul><li>helps the “demanders/consumers” – it is the maximum price that something can be charged for a good or service </li></ul><ul><ul><li>Example: a rent controlled building…. </li></ul></ul><ul><li>Price Floor </li></ul><ul><li>Prevent prices from dropping too low (helps producer) </li></ul><ul><li>Minimum price that can be charged for a good/service </li></ul>
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