Market Equilibrium Practice and Team Competition
Practice shifts in supply and demand curves to find new market equilibrium prices with a fun team competition. Participants draw market scenarios and identify shifters for a chance to earn points. Get ready for an engaging and interactive learning experience!
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Take Out Graphing Worksheet From Yesterday Objective: Practice single and double shifts of the supply and demand curve to find the new market equilibrium price. TE Skill: C-5 Demonstrate understanding of concept TEST ON MONDAY TEST ON MONDAY
Lighting Practice Round Each half of the room is a team Each team will send one member up at a time to the white board They will have one minute to draw the market for each event and show the shift of the curve, as well as the new equilibrium You may support your team member from your seat If one team finishes before the other-they get the point! A different person from each team will come up every time The side that win can earn an extra point if they can correctly name the shifter involved
PRICE OF RUBBER INCREASES DRAMATICALLY Athletic Shoe Market
MOVIE INCREASES POPULARITY OF ATHLETIC SHOES Athletic Shoe Market
PRICE OF SPORTS SANDALS DROPS DRASTICALLY Athletic Shoe Market
TWO NEW ATHLETIC SHOE COMPANIES ENTER THE MARKET Athletic Shoe Market
CONSUMERS WORRY PRICES OF ATHLETIC SHOES MAY INCREASE NEXT MONTH Athletic Shoe Market
INSECTS KILL HALF THE WORLD S TOMATO CROP Tomatoe Market
RECESSION HITS- MANY CONSUMERS LOSE JOBS Movie Ticket Sales Market
PRICE OF COMPUTER CHIPS TUMBLES (NEEDED TO MAKE COMPUTERS) Computer Market
PRICE OF SALMON SKYROCKETS Sea Bass Market
GOVERNMENT PLACES EXCISE TAX ON CIGARETTES TO DISCOURAGE SMOKING Cigarette Market
PRICE OF DVD PLAYERS PLUMMETS DVD Market
NEW, MORE EFFICIENT ASSEMBLY LINE TECHNOLOGY INTRODUCED Automobile Market
MCDONALDS OPENS UP 3 NEW LOCATIONS Big Mac Market
Take Out Graphing Worksheet From Yesterday Objective: Practice single and double shifts of the supply and demand curve to find the new market equilibrium price. TE Skill: C-5 Demonstrate understanding of concept TEST ON MONDAY TEST ON MONDAY
Four Single Shifts Memorize 1.Demand , then P , and Q 2.Demand , then P , and Q 3.Supply , then P , and Q 4.Supply , then P , and Q
Dual Shifts-When both curves move D S P ? Q D S P ? Q D S P Q? D S P Q?
To Sum Up: If Demand and Supply are moving together (either increasing or decreasing), PRICE PRICE will be unknown If Demand and Supply are moving opposite each other, QUANTITY QUANTITY will be unknown *We have unknowns because we do not know by how much the curve is shifting
CHANGES IN BOTH SUPPLY AND DEMAND If supply and demand decrease by the same amount, price will be unchanged and the quantity will decrease.
CHANGES IN BOTH SUPPLY AND DEMAND If supply decreases less than demand, price will decrease and quantity will decrease.
CHANGES IN BOTH SUPPLY AND DEMAND If supply decreases more than demand, price will increase and quantity will decrease.
CHANGES IN BOTH SUPPLY AND DEMAND If supply increases and demand decreases, the price will decrease and the quantity will not change.
P increase Q same Increase in Demand S1 S1 S0 S1 E1 E1 E E 1 1 Pe1 E Pe D1 D0 Qe1 Qe 0 Quantity of Video Games (thousands)
Practice Take a worksheet from the front to practice double shifts. There will also be examples of single shifts
Government Policies Price controls Price ceiling Price ceiling: a legal maximum on the price of a good or service. Example: rent control. Price floor Price floor: a legal minimum on the price of a good or service. Example: minimum wage.
EXAMPLE 1: The Market for Apartments P P S S Rental price of apts $800 Eq m w/o price controls D D Q Q 300 Quantity of apartments
How Price Ceilings Affect Market Outcomes A price ceiling above the equilibrium price is not binding not binding it has no effect on the market outcome. P P S S Price ceiling $1000 $800 D D Q Q 300
How Price Ceilings Affect Market Outcomes The equilibrium price ($800) is above the ceiling and therefore illegal. The ceiling is a binding binding constraint constraint on the price, and causes a shortage. P P S S $800 Price ceiling $500 shortage D D Q Q 400 250
EXAMPLE 2: The Market for Unskilled Labor W W S S Wage paid to unskilled workers $4 Equilibrium w/o price controls D D L L 500 Quantity of unskilled workers
How Price Floors Affect Market Outcomes A price floor below the equilibrium price is not binding not binding it has no effect on the market outcome. W W S S $4 Price floor $3 D D L L 500
How Price Floors Affect Market Outcomes labor surplus The equilibrium wage ($4) is below the floor and therefore illegal. The floor is a binding binding constraint constraint on the wage, and causes a surplus (i.e., unemployment). W W S S Price floor $5 $4 D D L L 400 550
Price floors & ceilings The market for hotel rooms 140 P P S S 130 Determine effects of: 120 110 A A. $90 price ceiling 100 90 D D B B. $90 price floor 80 70 C. C. $120 price floor 60 50 40 0 Q Q 50 60 70 80 90 100 110 120 130 39
A. $90 price ceiling The market for hotel rooms 140 P P S S The price falls to $90. 130 120 110 Buyers demand 120 rooms, sellers supply 90, leaving a shortage. 100 Price ceiling 90 D D 80 shortage shortage = 30 70 60 50 40 0 Q Q 50 60 70 80 90 100 110 120 130 40
B. $90 price floor The market for hotel rooms 140 P P S S Eq m price is above the floor, so floor is not binding. P P = $100, Q Q = 100 rooms. 130 120 110 100 90 Price floor D D 80 70 60 50 40 0 Q Q 50 60 70 80 90 100 110 120 130 41
C. $120 price floor The market for hotel rooms surplus surplus = 60 140 P P S S The price rises to $120. Buyers demand 60 rooms, sellers supply 120, causing a surplus. 130 120 Price floor 110 100 90 D D 80 70 60 50 40 0 Q Q 50 60 70 80 90 100 110 120 130 42
Effects of Price Controls Prices are the signals that guide the allocation of society s resources. This allocation is altered when policymakers restrict prices. Price controls are often intended to help the poor, but they often hurt more than help them: The min. wage can cause job losses. Rent control can reduce the quantity and quality of affordable housing.
