Seeking Equilibrium: Demand and SupplyWarm Up 3/4/2013

• Read Interaction of Demand and Supply on PAGES 164-1651. What happened at Karen’s initial price of

$10?• Karen is left with 30 extra salads

2. What happened at Karen’s lowest price of $2?• Karen has a shortage of 30 salads. She also

probably doesn’t make very much profit at that price.

3. What is Karen’s equilibrium price?• Karen’s equilibrium price is $6.

Graph it!Karen’s market demand and supply curves

Pric

e pe

r sal

ad in

dol

lars

$

Quantity of salads

0

2

4

6

8

10

0 10 20 30 40 50

Seasonal BUST!

• If you were thinking economically, when is the best time to buy Valentine’s Day candy?

Holiday Toys page 168

1. What happened when Tyco Toys Inc. first introduced Tickle Me Elmo in 1996?

2. What was the sale price during the holidays?

3. What happened to the sale price after the holidays? Explain.

4. Why do suppliers reduce their prices?

Disequilibrium pg 169• Recall- 6 factors of demand?

1. Income2. Consumer taste3. Consumer expectations4. Market size5. Substitutes6. Complements

Change in Demand & Equilibrium Price

Disequilibrium pg 170

• What are the 6 factors that change supply?– Input costs– Productivity– Technology– Government Action– Producer expectations– # of Producers

Change in supply & Equilibrium Price