How Supply & Demand Affects Prices
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Transcript of How Supply & Demand Affects Prices
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How Supply & Demand Affects
Prices
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What does it mean to be elastic?
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ElasticWhen the demand for a good changes in response
to change in price.
Example
$599.00July 2007
$399.00September 2007
$249.992010
$$$ Price Demand
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Inelastic
ElasticWhen the demand for a
good changes in response to change in price.
InelasticWhen the demand for a good …
With a partner try and come up with a definition for inelastic. Remember that we are referring to demand. Try and finish the sentence for inelastic.
does not change (or changes very little) in response to change in price.
$2.502007
$3.502010
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With a partner decide if each example is elastic or inelastic.
#1 #2
#3 #4
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Elastic or Inelastic
With a partner, come up with other examples of projects that are elastic or
inelastic.
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Normal vs. Inferior Goods
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Normal Goods
If your income increased what’s the first thing you
would you buy? Finish this sentence with a partner:I would buy a…..
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Normal Goods
$249.99This is the projected price
for the next 3 years.
You really want this phone, but you don’t have the
money.
It’s Christmas time and everyone just received
$300 from family. What are you going to buy?
Demand for the phone increases, but the cost stays
the same.
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What Does Inferior Mean?
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Inferior Goods
Vs.
Vs.
Vs. What is an inferior good?
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Normal & Inferior Goods
Normal
Turn to your shoulder buddy and make a list of normal vs. inferior examples.
Inferior Goods
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Substitute or Complementary Goods
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Substitution Good
$4.99$2.49
Which item would
you purchase?
Why?
If the cost of butter increases, the demand for margarine increases.
$3.75 $1.25
If the cost of coffee increases, the demand for tea increases.
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Complementary Good
It’s July 4th and is having a sale on hot dog buns. What are you going to buy to go with the hot dog buns?
Summer 2010, there was a massive recall on peanut butter. People stopped buying peanut butter. What other complementary good would people have stopped buying?
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Association Game