Identify the determinant (shifter) then decide if demand ... · Let’s talk current events! Supply...

Monday, Sept. 24 & Tuesday, Sept. 25

1. Population boom 2. Incomes fall due to recession3. Price of tacos, a substitute, decreases4. Price of hamburgers increases to $5 5. New health craze- “No ground beef”6. Hamburger restaurants announce that they will significantly

increase prices NEXT month 7. Price of fries, a complement, increases8. Restaurants lower price of burgers to $.50

Identify the determinant (shifter) then decide if demand will increase or decrease for Hamburgers (a normal good)

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Housekeeping Sept. 24 & Sept. 25

● Learning target: I can describe the law of supply and the supply determinants (shifters of supply).

● These students need a USATP account:1. Denzel2. Annie Gardner3. Izaak

● Homework: 1. USATP Unit 1 #2 due Friday, 9/282. HW1-6 due 9/28 or 10/1

● Unit 1b test will likely be next week Oct. 2 and 3

Let’s talk current events!

Supply DefinedWhat is supply?Supply is the different quantities of a good that sellers are willing and able to sell (produce) at different prices.

What is the Law of Supply?There is a DIRECT (or positive) relationship between price and quantity supplied.

•As price increases, the quantity producers make increases.•As price falls, the quantity producers make falls.

Why? Because, at higher prices profit seeking firms have an incentive to produce more.

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The Law of Supply

Producer/Supplier Survey1. Survey five students in class about how many hours they

would be able and willing to work at a particular job at a range of hourly wages.

2. Hourly wage range is $5, 10, 15, 20, 303. Jobs you may choose from are: babysitting 3-month-old

twins, digging ditches, roofing in July, cleaning out horse stables, math tutoring, teaching economics, picking onions in the summer, scraping gum off the bottom of desks at DHHS, taste-testing new Brussel-sprout recipes.

GRAPHING SUPPLY

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 809

PriceQuantitySupplied

$5 50

$4 40

$3 30

$2 20

$1 10

Supply

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GRAPHING SUPPLY

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 8010

PriceQuantitySupplied

$5 50

$4 40

$3 30

$2 20

$1 10

Supply

What if there are new and more productivemilking machines?

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Change in Supply

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 8011

Supply S2Price

QuantitySupplied

$5 50 70

$4 40 60

$3 30 50

$2 20 40

$1 10 30

Increase in SupplyPrices didn’t change but

there is MORE milk produced

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Change in Supply

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 8012

PriceQuantitySupplied

$5 50

$4 40

$3 30

$2 20

$1 10

Supply

What if the price fordairy cows increases

drastically?

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Change in Supply

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 8013

SupplyS2

PriceQuantitySupplied

$5 50 30

$4 40 20

$3 30 10

$2 20 1

$1 10 0

Decrease in SupplyPrices didn’t change but

there is LESS milk produced

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•••

14

••••••

A change in PRICE doesn’t shift the curve. It only causes a movement along the curve.

1. Which of the following will cause the quantity supplied for milk to decrease?

A.Decrease in the price of a key resourceB.A decrease in the number of milk producersC.A decrease in the price of milkD.An increase in the price of milkE.A subsidy for milk producers

17

Practice Questions

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Supply PracticeIdentify the determinant (shifter) then decide if supply will

increase or decrease

18

Shifter Increase or Decrease Left or Right

123456

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Supply Practice with Burgers

1. Strange virus kills 20% of cows 2. Price of hamburgers increase 30%3. Government taxes burger producers4. New bun-baking technology cuts production time in

half5. The government subsidizes beef producers6. Minimum wage increases to $20

1. Which determinant (SHIFTER)?2. Increase or decrease?3. Which direction will curve shift?

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Change in Supply

Q

$5

4

3

2

1

Price of Milk

Quantity of Milk

Supply Schedule

10 20 30 40 50 60 70 8020

Supply S2Price

QuantitySupplied

$5 50 70

$4 40 60

$3 30 50

$2 20 40

$1 10 30

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Shifter Practice

Whimsical Wednesday, September 26Thriving Thursday, September 27

Warm up: On a clean sheet of paper, write me a short letter about how you think you are doing in economics and include the following DETAILS:1. What you do in class to help you learn the material (for example,

taking notes, paying attention, asking questions).2. What you do outside of class to help you learn the material (for

example, coming to tutorial, watching review videos, reviewing your notes or doing homework).

3. How you studied for our unit 1a test and how much time you spent studying.

4. What do you think you need to do in this class going forward in order to insure that you pass and do well on the AP exam.

Housekeeping Sept. 26 & Sept. 27

● Unit 1b test will be next week Oct. 2 and 3● Learning target: I can explain price floors and

price ceilings● These students need a USATP account:1. Denzel2. Annie Gardner3. Izaak

● Homework: 1. USATP Unit 1 #2 due Friday, 9/282. HW1-6 due 9/28 or 10/1

Why does Ms. Browngive us so many darn quizzes?

●

correction

Example of Acceptable Test Correction:

•

•

Easy Medium Hard Very Hard

17 1 6 3 (throw out)

24 2 7 4

25 10 8 5

28 11 9 21

12 15 30

13 16

14 20

18 29

19

22

23

26

27, 31

31

Version A:

Friday, Sept. 28 & Monday, Oct. 1

● Unit 1b test will be next week Oct. 2 and 3○ Completed study guide due day of test

● Please get out HW 1-6 for me to check.● Warm up: quiz your neighbor on the following:

demand; demand shifters; supply; supply shifters; change in Qd and Qs; comparative advantage; circular flow.

Friday, Sept. 28 & Monday, Oct. 1

● Learning target: I can explain price floors and price ceilings; I can show what happens with a double shift.

● Turn in Unit 1a test corrections when you take the Unit 1b test (either 10/2 or 10/3)

● Homework: USATP Unit 1 #2 due TODAY

Questions about HW 1-6?

Let’s review Wednesday’s quiz

Putting Supply and Demand Together!!!

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Q

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8034

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10

Supply and Demand are put together to determine equilibrium price and equilibrium quantity

Equilibrium Price = $3 (Qd=Qs)

Equilibrium Quantity is 30

D

S

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Q

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8035

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

At $4, there is disequilibrium. The quantity demanded is less than quantity supplied.

Surplus (Qd<Qs)

How much is the surplus at $4?

Answer: 20

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Q

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8036

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

At $2, there is disequilibrium. The quantity demanded is greater than quantity supplied.

Shortage(Qd>Qs)

How much is the shortage at $2?

Answer: 30

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Q

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8037

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

Answer: 70

How much is the shortage if the price is $1?

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Q

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8038

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

SWhen there is a surplus, producers lower prices

The FREE MARKET system automatically pushes the price toward equilibrium.

When there is a shortage, producers raise prices

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2008 Audit Exam

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40

In the News: Shortage

Why is there a shortage of chicken wings? What might cause the price to fall?

41

In the News: Surplus

Why is there a surplus of cheese? What has prevented prices from falling?

Source: Vox https://www.vox.com/2016/10/13/13268980/cheese-glut-united-states

In the News: Change in the Global Chocolate Market

42

What is happening in the market for chocolate?DRAW IT!

Influencing Market Outcomes: Price Ceilings and Price Floors

● Price ceilings and price floors prevent the market (buyers and sellers) from determining prices that allocate goods and resources.

Double Shifts• Suppose the demand for milk increased at the

same time as production technology improved. • Use S&D Analysis to show what will happen to

PRICE and QUANTITY.• Double Shift Rule: If TWO curves shift at the

same time, EITHER price or quantity will be indeterminate (ambiguous).

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45

Demand increases AND supply increases Price

D

S

QuantityQe

D1

PeP1

Q1P indeterminate

Q increase

S1

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46

P indeterminateQ increase

Trick: Draw it out separately and combine the results

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47

P decreaseQ indeterminate

What if supply increases and demand falls?

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48

P indeterminateQ decrease

What if supply decreases and demand falls?

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Turkey Economics

https://www.usnews.com/news/articles/2015/11/24/why-do-turkey-prices-fall-just-before-thanksgiving

http://www.marottaonmoney.com/the-economics-of-a-thanksgiving-turkey/49

What do you think happens to the demand for turkey around Thanksgiving?

What do you think happens to the supply of turkeys around Thanksgiving?

DRAW IT!Read the articles below. Compare your prediction to the

information in the articles. Discuss your findings.

Qo

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8050

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10

Supply and Demand are put together to determine equilibrium price and equilibrium quantity

D

SWhat if the

government set a minimum price (price floor) of $4?

Qo

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8051

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

A $4 “price floor” would result in a surplus. The quantity demanded is less than quantity supplied.

Surplus (Qd<Qs)

How much is the surplus with a $4

price floor?Answer: 20

Price floor

Influencing Market Outcomes: Price Floors

● Price floor is the lowest price set by law that can be paid for a good or service● Minimum wage is an example: this is the lowest legal wage

that can be paid to most workers

Price Floors● Advantages:

● Minimum wage raises poor people’s incomes and provides a measure of equity

● Disadvantages:● Employers may hire fewer workers at higher wages, therefore

might result in an increase in unemployment

Qo

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8054

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

How much is the surplus if the price is $5?

Answer: 40

What if the government

sets a price ceiling (maximum price) of

$2?

Qo

$5

4

3

2

1

PDemand Schedule

10 20 30 40 50 60 70 8055

P Qd

$5 10

$4 20

$3 30

$2 50

$1 80

Supply Schedule

P Qs

$5 50

$4 40

$3 30

$2 20

$1 10D

S

With a $2 price ceiling, there is a shortage. The quantity demanded is greater than quantity supplied.

Shortage(Qd>Qs)

How much is the shortage at $2?

Answer: 30Price ceiling

Influencing Market Outcomes: Price Ceilings

Price ceiling is the maximum price set by law that can be charged for a product or services.

Examples: rent control laws in NYC keep some rental rates lower than the market price; $25 max price for car emissions tests in Georgia

Influencing Market Outcomes● Price ceiling disadvantages:

– Demand becomes too high.

– Suppliers face lower profits, therefore some suppliers limit service or leave market altogether.

– Advantages:– Achieve social goals of equity and security– Individuals who could not afford the market

price now may be eligible

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59

2008 Exam

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60

2012 Exam

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Practice FRQ