Economics: Understanding Supply and Demand Concepts, Summaries of Life Sciences

Download Economics: Understanding Supply and Demand Concepts and more Summaries Life Sciences in PDF only on Docsity! Economics: Supply and Demand Today you are making your own Economics Dictionary • Two pieces of blank paper • Fold together in half (hamburger style) • You have a set of graphs. Don’t glue them in until instructed to do so. Title Page: “Economics Dictionary” Name and period How is Price Determined? Price is determined by an agreement between the buyer and seller. 1’s- you are the seller- you want to sell your partner this delicious Coke for as much $ as possible 2’s- you are the buyer- you want to buy the delicious Coke from your partner for as little $ as possible THE CATCH: You must come to an agreement. You have 1 minute! GO! What price did you decide on? Economics is about that give and take: how we use limited resources (our Coke) to fulfill unlimited needs and wants (we’re thirsty!) Law of Demand Who would buy the candy bar if it cost only $0.50? …if it cost $1? …if it cost $2? …if it cost $4? …if it cost $8? PRICE QUANTITY DEMANDED $.50 $1 $2 $3 $4 $8 Law of Demand Price $ D Quantity Law of Supply ADD DEFINITION TO DICTIONARY Law of Supply - if the price supply , or if price supply Look at middle “Supply” graph. In plain English: If I can sell a candy bar for $10 then I want to sell a LOT of candy bars! If I can only sell my candy bars for $0.25 then I’m not interested in selling a lot. How am I supposed to make money like that?? Law of Supply • Plot points on Demand graph using RED pen • Connect points to make a supply line. • This is called the supply curve. PRICE QUANTITY SUPPLIED $.50 1 $1 5 $2 10 $4 15 $8 25 With BLUE pen: Plot and connect Demand curve With RED pen: Plot and connect Supply curve PRICE QUANTITY DEMANDED $.50 25 $1 15 $2 10 $4 5 $8 1 PRICE QUANTITY SUPPLIED $.50 1 $1 5 $2 10 $4 15 $8 25 Equilibrium Equilibrium Now draw an arrow and label your point of equilibrium. Surplus ADD DEFINITION TO DICTIONARY Surplus- a situation where the quantity supplied is more than the quantity demanded In plain English: My company came out with a new product, but no one will buy it at the price we want to sell. We have more than what people want to buy. Shortage Shortage- a situation where quantity supplied is less than the quantity demanded In plain English: There’s a hurricane headed toward Florida. You go to the store to find that the shelves are already picked bare. We have less than what people want to buy. Shortage Price $ Quantity Shortage- Real Life Example The current price for a a gaming system is around $300, but you cannot find them in a lot of stores. At this price, consumers are willing to buy a lot more than what suppliers are willing to make. Suppliers can’t just raise their price now, so there will continue to not be enough. How would you fix it? Suppliers should have charged a higher price to find equilibrium with demand.