Objectives:
1. Demonstrate how the intersect of supply and demand
curves equals price/market equilibrium.
3. Demonstrate consumer/supplier surplus on a given
supply and demand curve.
4. Apply knowledge of supply and demand determinants to
given scenarios--predict changes in price, quantity.
FMA: Scenario: Assume a perfectly
competitive market and that hot dogs
are an inferior good while steak is a
normal good. What happened
to the market for hot dogs after an
unexpected tax rebate check was sent
to all taxpayer? Steak? A1 sauce?
Explain each in properly labeled graph.
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Activities:
1. FMA/Attendance
2. FMA Discussion
3. Worksheet/Check
4. Notes: Diminishing Marginal Utility, Consumer Surplus; Producer
Surplus, Floors/Ceilings/Elasticity
5. Quiz--Supply and Demand.
6. Test Tuesday--Supply/Demand Determinants
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Notes:
Diminishing Marginal Utility-Each successive
unit of a product yields less and less usefulness.
Therefore, consumers will only purchase more if
price gets better.
Examples: How many houses would you want to
own? At $300,000? At $200,000? At 100,000?
This is the underlying reason for the law of
demand. We want more at low prices; less at
high.
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Elasticity of Demand (and Supply)
Sometimes people are more responsive to changes in price than others.
Elastic Demand (or supply)--when a change in price causes a big change in quantity demanded
What are some things people
might be very responsive to
change in price?
Inelastic Demand (or supply)--when a change in price causes a small change in quantity demanded.
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Do you think these could happen? Any examples you can think of?
Perfectly Elastic Key­if a good has a large number of very, very, very close (that is, perfect) substitutes. Example­­paper clip from a specific company.
Life saving drug?
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Attachments
5 supply and demand 1.ppt