Go Ahead…Take A Guess!!. Prices convey information to both. What do high and low prices tell each?...
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Transcript of Go Ahead…Take A Guess!!. Prices convey information to both. What do high and low prices tell each?...
How do prices act as signals for consumers and
producers?
Go Ahead…Take A Guess!!
Prices convey information to both. What do high and low prices tell
each? Prices help answer the (3)
economic questions
What do prices do?
1. They don’t favor either party –
they result because of competition Why can’t Chicken Run charge
$500 for chicken fingers?
IMPORTANT INFORMATION ABOUT PRICES
2. They are flexible – allows for
change
Disasters, weather, war effect price and people adjust
This is most often seen with products with which type of demand?
I don’t have anything to write up here
3. They provide choice – if they
become too high, people can go elsewhere
Don’t have anything for here either
4. Markets find their prices without
outside help Government does get involved
as we will see
Thought I had something for here…but I don’t
5. Prices are efficient – people can
make decisions about purchases and behavior quickly
Example: Hong Kong tolls
Here’s number 5
What system could be used to
allocate resources without prices?
What are the problems with this system?
Review
Draw a supply curve and demand
curve on the same graph. Label everything. Find a point on the graph that
represents the price and quantity that should be charged.
Label that point “E”.
So how do we get to a price?
What is point E called?
What happens if price falls above
this point? What happens if price falls below
this point? How do shifts in Demand and
Supply effect quantity and price?
The big questions:
This price leaves me too many - SURPLUS
This price leaves me too few - SHORTAGE
This one is just right!