MBMC Copyright c 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Sept. 23-Oct. 4...

MB MC

Copyright c 2007 by The McGraw-HillCompanies, Inc. All rights reserved.

Sept. 23-Oct. 4

Essential Question- What is Supply and Demand?

Learning Goal- To compare/contrast supply and demand.SCALE:

4- To compare/contrast supply and demand, and analyze how that affects personal finance.

3- To compare/contrast supply and demand.

2- To define supply and demand.

1- No Understanding.

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AN INTRO TO SUPPLY AND DEMAND- SEPT. 23

ENGLISH AUCTION: HOW TO APPLY ECONOMICS

I will be selling an announced number of M&M packets through an English auction to derive a classroom demand curve. In the same lecture I will give each student a packet of M&Ms and buys back an announced number of packets through a reverse English auction to derive a classroom supply curve.

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AUCTION: DEMAND

I am now going to run a classroom auction. Please listen carefully as I read the instructions for this auction. I am passing out blank index cards and you should each take ONE card. You should not write anything on this card until told to do so.

I (the teacher) will be auctioning off to the highest bidders "fun size" M&M packets (1.69 oz), which you can see here in my hand. I will sell up to three packets. You can each purchase a maximum of one packet. Prior to participating in the auction, think about the maximum price at which you would be willing to buy an M&M packet. You will be required to pay in U.S. currency, so please do not bid values above $0 if you are not prepared to pay.

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Demand

The auction begins with every student standing, so please stand up now. I am writing on the board the starting price for the auction, which will be $0. I will then begin to increase the price. By remaining standing, you are indicating that you would be willing to buy a packet of M&Ms at the price most recently announced. If at any point in the auction, the announced price rises above the maximum price at which you are willing to buy a packet, you should sit down.

When you sit down, please write on your index card the price that came before the announced price that caused you to sit down. In other words, write down the price that was either equal to or less than the maximum price that you were willing to pay for the M&M packet. You do not write anything else on the card.

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Demand

The price will rise until three or fewer students remain standing. At this point the price stops rising and all bidders still standing will pay this price in exchange for a packet of M&Ms. I ask that these winning bidders estimate the maximum amount that they were willing to pay for the M&M packet, if the price had continued rising, and write it down on their index cards.

We will then graph the results: DATA ENTRY WEBSITE

http://www.econport.org/content/teaching/modules/DemandSupply/DemandExp.html

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AUCTION: SUPPLY

I am now going to run another classroom auction that is similar to the previous one we ran with the exception that instead of selling M&M packets through the auction, I will be buying M&M packets. Please listen carefully as I read the instructions for this auction. I am passing out blank index cards and you should each take ONE card. You should not write anything on this card until told to do so. I am also passing around "fun size" M&M packets (1.69 oz). You should each take just ONE packet. Please do not take any more than one packet.

I (the teacher) will be purchasing up to three M&M packets from students in the classroom. You can sell a maximum of one packet each. Prior to participating in the auction, think about the minimum price at which you would be willing to sell your M&M packet to me

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SUPPLY

The auction begins with every student standing, so please stand up now. I am writing on the board the starting price for the auction, which will be $3. I will then begin to decrease the price. By remaining standing, you are indicating that you would be willing to sell your packet of M&Ms at the price most recently announced. If at any point in the auction, the announced price drops below the minimum price at which you are willing to sell a packet, you should sit down.

When you sit down, please write on your index card the price that came before the announced price that caused you to sit down. In other words, write down the price that was either equal to or greater than the minimum price that you were willing to accept for giving up your M&M packet. You do not write anything else on the card.

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SUPPLY

The price will decline until three or fewer students remain standing. At this point the price stops declining and all bidders still standing will receive this price in exchange for a packet of M&Ms. We ask that these winning bidders estimate the minimum amount that they were willing to accept for giving up their M&M packet, if the price had continued declining, and write it down on their index cards.

MARKET ANALYSIS: DATA ENTRY-

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Slide 9

Supply and Demand: BELLWORK- Sept. 24

How do consumers get the goods and services they want in the right quantities and qualities?

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BELLWORK- ANSWER

Some goods and services are allocated by the market forces of supply and demand

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Slide 11

Supply and Demand: An Introduction

Why do some goods and services have shortages or surpluses and others do not?Some good and supplies services are

regulated by government

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Slide 12

What, How, and For Whom?

Three Problems All Economic Systems Must AddressWhat should be produced?How should it be produced?For whom will it be produced?

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Slide 13

What, How, and For Whom?

Free-Market or Capitalist Economic SystemIndividual choices determine:

Which careers to pursueWhich products to produce or buyWhen to start and shut-down a businessWho gets what is decided by individual

preferences and purchasing power

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READING DAY

Students will read Freakonomics during the rest of their class in preparation to address Question 2 in their Freakonomics Paper.

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Bellwork- Sept. 25

Define a Capitalistic Economy

Slide 15

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Slide 16

Buyers and Sellers In Markets

MarketConsists of all buyers and sellers of a good

or service What do you think?

What determines the price of pizza, gasoline, a car wash, or other goods and services?

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Slide 17


The Demand CurveA schedule or graph that tells us the

quantity of a good that buyers wish to buy at each price

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Slide 18


A Property of DemandAs price of a good or service goes down

the quantity consumers wish to buy will increase

Therefore, the demand curve is downward-sloping

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Slide 19

The Daily DemandCurve for Pizza in Chicago

Price($ per slice)

Quantity(1000s of slices per day)

4

8

2

16

3

12

Demand

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DEMAND ACTIVITY

http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm

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SEPT. 26th- Bellwork

Define Demand- what is it?

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Slide 22


The Demand CurveWhy do buyers purchase a greater quantity

at lower prices and vice-versa?The substitution effectThe income effect

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Slide 23


The Substitution EffectThe change in the quantity demanded of a

good that results because buyers switch to substitutes when the price of the good changes

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Slide 24


The Income EffectThe change in the quantity demanded of a

good that results because a change in the price of a good changes the buyer’s purchasing power

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Slide 25


The Cost-Benefit PrincipleThe reservation price is the benefit the buyer

receives from the goodThe cost of the good is its market priceIf the reservation price (benefit) exceeds the

market price (cost) the consumer will purchase the good

At higher prices, benefit will exceed cost for a smaller quantity than at lower prices

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Slide 26


Price($ per slice)


Demand

8 12 16

The buyers reservation price: The largest dollar amount the buyer would be willing to pay for a good

4

2

3

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Slide 27


Horizontal Interpretation

Price determines quantity demanded

Price($ per slice)

4

2

3

8 12 16

Demand

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Slide 28


Vertical Interpretation

Quantity measures the marginal buyer’s reservation price

Price($ per slice)

4

2

3

8 12 16

Demand

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What do people want to wear?-Demand Activity

http://www.econedlink.org/lessons/index.php?lid=458&type=student

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Bellwork- 9/27

Why do businesses look to the consumer to determine the supply?

Slide 30

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An Intro to Supply and Demand

The Toy Market- Supply and Demand

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Bellwork- Sept. 30th

How many hours do you spend studying every night?

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How many hours would you study if you were paid $1 an hour?

$10 an hour? If you would study more at a higher

price, you are following the Law of Supply.

Slide 33

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Slide 34


The Supply CurveA curve or schedule showing the quantity

of a good that sellers wish to sell at each price

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Slide 35


QuestionWill the opportunity cost of producing

additional units of pizza increase or decrease?

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Slide 36


The Supply CurveSellers must receive a higher price to

produce additional units of product to cover the higher opportunity costs of each additional unit

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Slide 37

The Daily SupplyCurve for Pizza in Chicago

Price($ per slice)


4

2

3

8 12 16

Supply

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Slide 38


Price($ per slice)


4

2

3

8 12 16

Supply

Horizontal Interpretation

Shows the quantity produced

for each price

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Slide 39


Price($ per slice)


4

2

3

8 12 16

Supply

Vertical Interpretation

Shows the marginal cost (reservation

price) for producing each additional unit

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Slide 40

Seller’s Reservation PriceThe smallest dollar amount for which a

seller would be willing to sell an additional unit, generally equal to marginal cost


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Thus, the Law of Supply states that the quantity supplied varies directly with its price.

In other words, if prices are high, suppliers will offer greater quantities for sale.

If prices are low, they will offer smaller quantities for sale.

Slide 41

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video

http://www.econedlink.org/interactives/index.php?iid=221&type=student

Slide 42

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Bellwork-Oct. 1

Define Supply, why do demand and supply go hand-in-hand?

Slide 43

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Students will read article, to prepare them for the day’s activity.

http://www.econedlink.org/interactives/index.php?iid=221&type=student

Slide 44

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Slide 45

Market Equilibrium

EquilibriumA system is in equilibrium when there is no

tendency for it to change Market Equilibrium

Occurs in a market when all buyers and sellers are satisfied with their respective quantities at the market price

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Slide 46

The Equilibrium Price and Quantity of Pizza In Chicago

Price($ per slice)


4

2

3

8 12 16

Supply

Demand

Equilibrium at $3

Quantity Demanded =

Quantity Supplied

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Slide 47

Market Equilibrium

Equilibrium Price and Equilibrium QuantityThe values of price and quantity for which

quantity supplied and quantity demanded are equal

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Slide 48

What Do You Think?Would buyers prefer a lower price than the

equilibrium price?Would sellers prefer a higher price than the

equilibrium price?

Market Equilibrium

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Slide 49

Excess Supply

Price($ per slice)


4

2

3

8 12 16

Supply

Demand

Excess supply = 8,000 slices per day

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Slide 50

Excess Demand

Price($ per slice)


4

2

3

8 16

Excess demand = 8,000slices per day

Supply

Demand

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Slide 51

Points Along the Demand and Supply Curves of a Pizza Market

Demand for pizza Supply of pizza

Price

($/slice)

Quantity demanded

(1000s of slices/day)

Price

($/slice)

Quantity supplied

(1000s of slices/day)

1 8 1 2

2 6 2 4

3 4 3 6

4 2 4 8

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Slide 52

Graphing Supply and Demand and Finding the Equilibrium Price and Quantity

Price($per slice)


5

2

3

4

1

4

102

Demand

0 6 8

Supply

2.50

5

The Equilibrium Price = $2.50The Equilibrium Quantity = 5

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Activity

Students will complete worksheet. This is your Exit Slip for today’s class.

http://www.econedlink.org/lessons/docs_lessons/747_ChangingYourPrice15.pdf

Slide 53

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Slide 54

What Do You Think?Is the market equilibrium always an ideal

outcome for all market participants?

Bellwork- Oct. 2

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READING DAY- Oct. 2

Students will read Freakonomics in preparation for their next paper due date.

Slide 55

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Bellwork: Oct. 3

Why do prices always change on gas? (hint: think current events)

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Slide 57

An Unregulated Housing Market

Monthly Rent($/apartment)

Quantity(Millions of apartments/day)

1,600

2

Supply

Demand

What Do You Think?Is $1600 more than some people can afford?

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Slide 58

Rent Controls



1,600

2

Supply

Demand

2,400

Controlled = 800

1 30

Excess demand = 2 million apartments per month

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Slide 59

Market Equilibrium

Rent Controls ReconsideredOther consequences of rent controls

Maintenance will decline and housing quality will fall

Illegal paymentsCreation of co-ops and conversion to

condominiumsReduction in household mobilityDiscrimination

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Slide 60

Market Equilibrium

What do you think?How can we make housing affordable for

poor people without using rent ceilings?

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Slide 61

Rent Controls



800

2

Supply

Demand

1,200

1 30

What is the impact of a rent control set at $1,200/month?

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Slide 62

Price Controls In The Pizza Market

Price($ per slice)


Supply

Demand

Excess demand = 8,000 slices per day

4

Price ceiling = 2

3

8 12 16

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Slide 63

Market Equilibrium

Pizza Price Controls?Market responses to a pizza price ceiling

Long linesPreferential treatment to selected customersAlternative pricing strategiesPoorer quality ingredientsBlack-market pizzas

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Reading

http://web.archive.org/web/20071109111737/http://www.cnn.com/US/9706/15/rent.control/

Slide 64

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Price Ceiling Questions

1. Make a list of who wins and who loses under rent control.

2. What happens to all of the dissatisfied apartment-seekers? Make a list of alternative rationing devices.

3. How do rent controls affect the following?

Amount of new rental property

Quality of rental property

Age of population

4. How would you predict residents of rent-controlled units would vote on a referendum to repeal rent-control laws?

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Bellwork: Oct. 4

Are there any substitutes for gasoline?

Slide 66

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Slide 67

Predicting and Explaining Changes In Prices and Quantities

Gasoline Activity: http://www.stlouisfed.org/education_resources/assets/lesson_plans/07ITV_ShiftingCurves.pdf

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Slide 68


Shifts in DemandChanges In Demand

An increase (decrease) in the demand for a good will shift the demand curve to the right (left)

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Slide 69


A Change In IncomeNormal Good

One whose demand increases (decreases) when the incomes of buyers increase (decrease)

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Slide 70


A Change In IncomeInferior Good

One whose demand decreases (increases) when the incomes of buyers increase (decrease)

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Slide 71


Factors that Shift DemandPrice of complementsPrice of substitutesIncomePreferencesPopulation of potential buyersExpectations

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Slide 72


Factors that Shift SupplyCosts of productionTechnologyWeatherNumber of suppliersExpectations

MBMC Copyright c 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Sept. 23-Oct. 4...

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Transcript of MBMC Copyright c 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Sept. 23-Oct. 4...