Supply and Demand at Work 21.3 & 21.4. What is Supply and Demand The amount of goods a producer is...
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Transcript of Supply and Demand at Work 21.3 & 21.4. What is Supply and Demand The amount of goods a producer is...
Supply and Demand at Work
21.3 & 21.4
What is Supply and Demand
• The amount of goods a producer is willing to sell at market prices.
• Opposite of demand• Law of Supply - suppliers offer more goods at
higher prices and less at lower prices• Profit: the reason suppliers offer goods and
services• Market Supply: all the supply available in a
given market
Why does supply change?
• Cost of resources• Productivity• Technology • Government Policies• Taxes• Subsidy: government payment for a certain
action.• Expectations• Number of Suppliers
Supply Elasticity
• How quickly suppliers can change supply• Inelastic: not able to change the supply quickly• Elastic: Able to change the supply quickly
Supply, Demand and Price
• Supply and Demand work together to create a price.
• Equilibrium price: the point where supply matches demand
• Surplus: Supply is greater than demand– Price is too high
• Shortage: demand is greater than supply– Price is too low.
Price Controls
• Government can regulate price if they feel forces of demand and supply are unfair.
• Price Ceiling - Maximum price set by the government that can be charged
• Price Floor – the minimum price that can be charged.
• Minimum Wage- lowest legal wage that can be paid to workers.
North Carolina’s Minimum Wage
Minimum Wage by State
Prices as Signals
• Consumer Price Index: measure the costs of goods over times
• Prices tell us what people are buying.• Prices are neutral• Prices are flexible• Prices show freedom of choice• Prices are familiar