When Supply Meets When Supply Meets DemandDemand

CS

Pric

es o

f App

les

Quantity in tons of Apples

50 100 150 200 250 300 350 400 450 500

.1

0

.15

.20

.25

.3

0

.35

.4

0 .

45 .

50

D

S

D1

P

Q

PCShortage

PF

Surplus

P1

Q1

The federal governments price ceiling is set below the market price. As a result, buyers demand more at the lower price, and sellers are willing to sell less at the lower price. This results in a shortage of apples.

The federal governments price floor is set above the market price. As a result. Sellers will be willing to sell more and buyers will be willing to buy less. This results in a surplus of apples.

Assume you go into a store and buy a pack of delicious French Onion flavored Sun Chips. The chips cost you $1.00. You love them so much you would have been willing to $2.00. The difference between what you paid and what you would have been willing to pay is consumer surplus (CS). At this price you got a good deal!

Why is consumer surplus important? When markets create consumer surplus, many consumers buy the good for less than they would be willing to pay. Consumers like this because they are getting a deal!

Producers dislike it because they know some people would be willing to pay more.

Ex. Shoes at Nordstrom's

Buying a used car

*If the price consumers pay increases, consumer surplus decreases*If the price consumers pay increases, consumer surplus decreases

.30

.35

.40

.45

.25

.20

.15

50 100 150 200 250

P

Q (in millions)

D

S

S

Why is consumer surplus important? When markets create consumer surplus, many consumers buy the good for less than they would be willing to pay. Consumers like this because they are getting a deal!

Producers dislike it because they know some people would be willing to pay more.

Ex. Shoes at Nordstroms

Buying a used car

CS

Pric

es o

f App

les

Quantity in tons of Apples

50 100 150 200 250 300 350 400 450 500

.1

0

.15

.20

.25

.3

0

.35

.4

0 .

45 .

50

D

S

D1

P

Q

PCShortage

PF

Surplus

P1

Q1

Now you Try…Now you Try…

Use the information you just learned to see how supply Use the information you just learned to see how supply and demand works with gumballs.and demand works with gumballs.

First plot your graph given the information. (1-7)First plot your graph given the information. (1-7)

Next answer the questions on your worksheet. (A-E)Next answer the questions on your worksheet. (A-E)

Higher-Order Thinking Question: Higher-Order Thinking Question: Finally, create Finally, create your own scenario. In your scenario, explain the your own scenario. In your scenario, explain the aspects of demands and price floors and ceilings.aspects of demands and price floors and ceilings.

Take a Stand!Take a Stand!Some professions have huge discrepancies of salaries even Some professions have huge discrepancies of salaries even though they perform the same job. though they perform the same job.

It is your job to decide if this is fair. You have 10-seconds to It is your job to decide if this is fair. You have 10-seconds to choose one of the following stances and stand at your number.choose one of the following stances and stand at your number.

Yes, they deserve every penny.

No, other professionals deserve the same.

It depends.

-Doctors-Lawyers-Authors

Homework AssignmentHomework AssignmentYou have been placed in one of the 5 following groups:You have been placed in one of the 5 following groups:

•AthletesAthletes

•Movie Stars Movie Stars

•Television ActorsTelevision Actors

•College ProfessorCollege Professor

•CEOCEO

You will:You will:

1)A salary discrepancy between at least two people of the same profession.

2)One source that defends their stance.

3) Write a 4-paragraph essay explaining why they have come to their conclusion.

Thrash it OutThrash it Out• Today you will debate your position with people Today you will debate your position with people

researching the same profession! researching the same profession!

• For the next 10-Minutes and will work with your partners For the next 10-Minutes and will work with your partners from the previous day. Discuss what you learned from from the previous day. Discuss what you learned from your research. Come up with arguments to defend your your research. Come up with arguments to defend your stance and think about possible rebuttals. stance and think about possible rebuttals.

• You will be debating your topic with your original groups…You will be debating your topic with your original groups…

Good Luck!

QuestionsQuestionsHow do the laws of supply and demand affect the salaries of How do the laws of supply and demand affect the salaries of these professions?these professions?

What would a price ceiling or price floor do to people What would a price ceiling or price floor do to people employed in these professions?employed in these professions?

How do salary discrepancies relate to a market economy?How do salary discrepancies relate to a market economy?

Analyze each debate. How does this relate to the supply and Analyze each debate. How does this relate to the supply and demand of goods and services?demand of goods and services?

How does the Invisible Hand control salaries?How does the Invisible Hand control salaries?