CH 6 ECON: Demand, Supply, and Prices

e. one of the 6 factors that change supply

(one of the 6 factors that change ________) producer expectations

e. one of the 6 factors that change demand

(one of the 6 factors that change ________) substitutes

c. one of the 6 factors that change supply

(one of the 6 factors that change ________) technology

tennis store VS. sports authority opening up a tennis section

what is an example of competitive pricin?

farmers- gov't wants to make sure farmers produce an abundance of food ->set price floors->so farmer will keep producing a large supply while still making a profit

what is an example of price floor? (farmer)

B/C of the intersection of the supply and demand represent market eq.

what is equilibrium price represented by the intersection of the supply and demand curves in a particular market?

the price when this is reaches as equilibrium priced (perfect)

what is market equilibrium?

price gouging is charging outrageously high prices for limited goods or services simply because they are able to and can lead to a black market

what is price gouging and how does it affect the economy?

a price floor is the minimum price that buyers may pat for a product; a price ceiling is a maximum price that may be charged for a product

what is the difference between a price floor and a price ceiling?

its purpose is supposed to help visualize the correlation price and quantity to reach eq. price

what is the purpose of a market demand and supply schedule show exhibit?

shift to the left

what kind of shift does a decrease in demand have?

shift to the right

what kind of shift does consumer taste have?

shift to the left

what kind of shift is displayed when input cost increases, supply will decrease?

there might be more workers willing to work for the minimum wage than there are jobs that employees are wiling to offer the wage @ above equilibrium

what kind of surplus might be created by the minimum wage?

emerges when goods and services are illegally bought and sold in violation of price controls or rationing.

what situation creates black market?

occurs when the gov't allocates goods and services using factors other than price

what situation creates rationing?

consumers tend to buy more when price is low

when do consumers buy more?

WW2

when in history did the government of the US make rationing the law?

when theres a shortage, this is a signal for the producer to raise prices so they can supply more

when theres a shortage, what does the producer do?

suppliers will have to lower their prices with a surplus

when theres a surplus, what must the suppliers do?

the interaction is eq. price, there is neither a surplus nor a shortage. Above is that quantity supplied exceeds quantity demanded and there's a surplus. Below is that quantity demanded exceeds quantity supplied and there is a shortage?

when you graph the schedule, what does the intersection show and the areas above and below it?

competitive pricing in the market exists when producers will lower prices to get more customers while still making a profit

where does competitive pricing exist?

consumers

who does a price ceiling benefit?

a price ceiling helps the students when there are student discounted tickets. it hurts the seller or producers because they're loosing money but gaining loyal customers

who does a price ceiling help and hurt and give a real life example of one?

help: consumer hurt: producer

who does a price ceiling hurt or help?

producers

who does a price floor benefit?

the government sets price floors

who sets price floors?

usually the government will set the price ceiling to help the consumer pay a cheaper price

who sets the price ceiling?

changes in supply or demand causes changes in the quantities supplied or demanded @ every price. Therefore, the quantities will no longer by equal @ the original equilibrium price.

why do changes in demand or supply cause disequilibrium?

suppliers use advertising to convince consumers that prices are low and the "deal" is usually for a certain amount of time to get consumers in the market

why do suppliers utilize advertising?

B/C producers are always searching for market equilibrium and consumers is always trying to find the best deal

why is the market always moving toward equilibrium?

Decisions about what and how much to produce are based on what consumers have demanded for and the prices at which producers can make money

why is the price system and efficient way to allocate resources?

when a price limit is set @ the highest value you can change

what is a price ceiling?

consumer taste

what is an example of change in demand?

f. one of the 6 factors that change supply

(one of the 6 factors that change ________) number of producers

neutral

(1 of the 4 characteristics of ____________) both the producer and consumer make choices that determine the eq. price

market driven

(1 of the 4 characteristics of ____________) market forces, not gov't policy, determine prices; system runs itself

efficient

(1 of the 4 characteristics of ____________) resources are allowed efficiently since prices adjust until the max # of goods and services are sold

flexible

(1 of the 4 characteristics of ____________) when market conditions change and so do prices

d. 1 of the 4 characteristics of the price system

(1 of the 4 characteristics of the __________) it allocates resources efficiently

a. 1 of the 4 characteristics of the price system

(1 of the 4 characteristics of the __________) it favors producers and consumers equally

c. 1 of the 4 characteristics of the price system

(1 of the 4 characteristics of the __________) it is flexible in responding to changes in the market

b. 1 of the 4 characteristics of the price system

(1 of the 4 characteristics of the __________) it runs itself

f. one of the 6 factors that change demand

(one of the 6 factors that change ________) complements

d. one of the 6 factors that change demand

(one of the 6 factors that change ________) consumer expectations

c. one of the 6 factors that change demand

(one of the 6 factors that change ________) consumer tastes

d. one of the 6 factors that change supply

(one of the 6 factors that change ________) government action

a. one of the 6 factors that change demand

(one of the 6 factors that change ________) income

a. one of the 6 factors that change supply

(one of the 6 factors that change ________) input costs

b. one of the 6 factors that change supply

(one of the 6 factors that change ________) labor productivity

b. one of the 6 factors that change demand

(one of the 6 factors that change ________) market size

they search for substitutes for the rationed goods

aside from turning to the black market, how do consumers make up for goods that are rationed?

equilibrium price decreases

since supply increases when input cost decreases, what happens to equilibrium price?

equilibrium price goes up

because of a shift to left, what happens to the equilibrium price?

incentive

encourages people to act in certain ways

price is a powerful incentive to consumers

example of incentive for consumers

higher prices act as an incentive for producers to enter a market

example of incentives for producers

student discounted tickets

example of price ceiling

minimum wage

example of price floor

it favors producers and consumers equally; it runs itself; it is flexible in responding to changes in the market; it allocates resources efficiently

explain the 4 characteristics of the price system

they can both b/c holiday toys are fads and with expected popularity, the stores could be left with a shortage in that the demand exceeds supply and a surplus in that supply exceeds demand

how can holiday toys be an example of surplus or a shortage?

*when demand decreases, the eq. price falls *when demand increases, the eq. price rises *when supply decreases, the eq. price rises *when supply increases, the eq. price falls

how do changes in demand and supply effect equilibrium price?

for rising prices, on incentive to enter a market; for falling prices, an incentive to leave a market. for low price, incentive to buy; for high prices, incentive to find substitutes

how do incentives encourage producers and consumers?

Rising prices provide the incentive to enter a market by signaling the possibility of increasing revenue, and therefore, profits.

how do prices serve as signals and incentives to producers to enter a particular market?

Falling prices provide the incentive to leave a market, as they signal the possibility of decreasing revenue, and therefore, profits

how do prices serve as signals and incentives to producers to leave a particular market?

surplus costs suppliers to leave the market

how does a surplus impact the supplier and their prices?

by entering a market @ a lower price, a new producer can add to its customer base while it mains overall profits by selling more units

how does competitive pricing impact the consumer and producer?

give up daily goods and turn them into rarities

how does rationing impact the economy?

takes business away from legitimate businesses. taxes aren't collected.

how does the black market impact the economy?

rationing attempts to allocate scarce resources fairly to everyone regardless of their ability to pay. the black market undermines this by permitting those who can pay higher prices to get more of the rationed goods.

how does the existence of black market work against the intended purpose of rationing?

it showed that when a strong competitor offers similar products for lower prices other producers must also lower their prices. Less efficient companies were driven from the market.

how does the story of Dell inc. demonstrate the effects of competitive pricing?

law of supply- producers are willing to sell more of a good or service at a higher price than they are at a lower price. law of demand- when price goes down, quantity demanded increases, and when the price goes up, quantity demanded falls

how does this schedule represent the law of supply and demand?

# @ which minimum is set can create problems and tied into market value (eq. price), it can create more unemployment

how is minimum wage a price floor?

surplus is above eq. price and shortage is below eq. price

how is surplus and shortage related to equilibrium price?

if prices were at equilibrium on the graph and the price and quantity supplied is proportional and efficient in yielding revenue

how would you know an an owner when your prices are good?

equilibrium price decreases

if demand decreases... (eq. price)

equilibrium price increases

if demand decreases... (eq. price)

equilibrium price increases

if supply decreases... (eq. price)

equilibrium price decreases

if supply increase... (eq. price)

black market

involves illegal buying or selling in violation of price controls or rationing

rationing

is a government system for allocating goods and services using criteria other than price

price floor

is a legal maximum that buyers must pay for a product

equilibrium price

is the price @ which the quantity demanded and the quantity supplied are equal

shortage

is the result of quantity demanded being greater than quantity supplied

surplus

is the result of quantity supplied being greater than quantity demanded

minimum wage

legal minimum amount that an employer must pay for one hour of work

competitive pricing

occurs when producers sell products @ lower prices to lure customers away from rival producers, while still making a profit

disequilibrium

occurs when quantity demanded and quantity supplied are not in balance

market equilibrium

occurs when the quantity demanded and the quantity supplied at a particular price are equal

price ceiling

the legal maximum price that sellers may charge for a product

neutral, market driven, flexible, efficient

what are 4 characteristics of the price system?

est. lowest possible price for someone to pay for good or service

what are price floors?

income, market size, consumer tastes, consumer expectations, substitutes, and complements

what are the 6 factors that change demand?

the 6 factors that can change supply are input costs, labor productivity, technology, government action, producer expectations, and number of producers.

what are the 6 factors that change supply?

can't set your own price, supply of resources will decline, reduces availability to market, reduce the quality of products

what are the negatives of price ceiling?

increasing consumer prices, costs of imports increase due to increase in import tariffs, encourage inefficiency and oversupply in production

what are the negatives of price floor?

when there is an imbalance between quantity demanded and quantity supplied

what creates disequilibrium?

surplus and shortage motivates producers to adjust prices until quantity supplied and quantity demanded are the same

what do surplus and shortage encourage the producers to do?

they both show the quantities of products supplied and demanded @ various prices

what does a market demand and supply schedule show?

supply will increase

what happens to supply when input cost decreases?

equilibrium price goes up

what happens when consumer taste increases?

supply will decrease

what happens when input cost increases?

they have reached market equilibrium

what happens when the exact supply meets they exact demand?

it causes a decrease in demand

what happens when there a change in demand?

shortage

what happens when your demand is more than your supply and all your points on the graph are below equilibrium?

surplus

what happens when your supply is more than your demand and all your points on the graph are above equilibrium?

His incentive was to gain access to computer industry and make more revenue than his competitors, thus making more of a profit

what incentive did Michael Dell have to sell his computers cheaper than his competition? and how was he able to do it?

it will help you figure out how to get to your equilibrium price through records

what information for production purposes does a price history provide?