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DateDate: March 21, 2013: March 21, 2013
TopicTopic: The Role of Prices: The Role of Prices
AimAim: How do prices play a role in the : How do prices play a role in the free market? free market?
Do NowDo Now: Multiple Choice Questions: Multiple Choice Questions
How big is the surplus of workers when the minimum wage is $5.15 an hour?
4 million workers.
NOW LOOK, NOW WATCH!
APPLICATION!
• Prices are a tool for distributing goods and resources throughout the economy.
• Price helps move land, labor, capital into the hands of producers, and finished goods into the hands of buyers.
• Buyers/Sellers look at prices to find information on a good’s demand and supply.
• Tells a consumer or producer how to adjust.
• Whether goods are in short supply or readily available.
• High price: a specific good is in demand and more is produced.
• New suppliers will also join the market.
• Low price: a good is being overproduced.
PEOPLE BUY ABERCROMBIE AND FITCH CLOTHING BECAUSE IT SAYS ABERCROMBIE AND FITCH!
ABERCROMBIE PRODUCES MORE CLOTHING AT A HIGH PRICE BECAUSE PEOPLE ARE WILLING TO PAY FOR IT.
• When a supply or demand shift changes the equilibrium, price and quantity supplied need to change to solve problems.
• Prices: Easily increase or decrease.
• Raising prices is the quickest way to resolve excess demand.
Income, population etc. with demand
Income costs, technology with supply
• Free Market pricing distributes goods through millions of decisions daily by consumers and suppliers.
• Prices helps goods flow through the economy without a central plan.
• Command Economy: One organization decides what goods are produced and how much stores will charge for these goods.
BUT!
Time of WarIn history: Prohibition
Illegal Drugs, Tobacco,Firearms, Alcohol,Copy write media (video games, software
etc.)