Disclaimer The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System TEKS 2 Economics The student understands the interaction of supply demand and price The student is expected to ID: 1027528
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1. Session 4Supply and DemandDisclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.
2. TEKS(2) Economics. The student understands the interaction of supply, demand, and price. The student is expected to: (A) understand the effect of changes in price on the quantity demanded and quantity supplied; (B) identify the non-price determinants that create changes in supply and demand, which result in a new equilibrium price; and (C) interpret a supply-and-demand graph using supply-and-demand schedules.
3. Teaching the TermsMarketDemandSupplyDeterminantsSurplusShortage
4. MarketsA market facilitates the interaction of a buyer and a seller as they complete a transactionBuyers, as a group, determine the demandSellers, as a group, determine the supply
5. Characteristics of Competitive MarketsIdentical goods or servicesEnough buyers and sellers so that no participant can influence the market price – everyone is a price taker
6. DemandLaw of demandQuantity demandedDemand scheduleDemand curveDeterminants of demand
7. The Law of Demand
8. DemandPriceQuantity$510$420$330$240$150
9. Determinants of DemandIncomePrice of related goodsComplementsSubstitutesTastes or preferencesExpectationsNumber of buyers
10. Shifting Demand
11. SupplyLaw of supplyQuantity suppliedSupply scheduleSupply curveDeterminants of supply
12. The Law of Supply
13. SupplyPriceQuantity$550$440$330$220$110
14. Determinants of SupplyInput pricesTechnologyExpectationsNumber of sellers
15. Shifting Supply
16. Market EquilibriumPriceQuantity DemandedQuantity Supplied$51050$42040$33030$24020$15010
17. Market Equilibrium
18. Market Equilibrium
19. PracticeDraw the graph.Which curve is shifting because of the changing market conditions? Supply? Demand? Both?Which direction is the shift?Draw the shift.What is the impact on price and quantity?
20. Price ControlsPrice CeilingIf price is fixed BELOW the market clearing priceCreates a shortage because Qd > QsRent controlsPrice FloorIf price is fixed ABOVE the market clearing priceCreates a surplus because Qd < QsMinimum wage
21. Price Elasticity of DemandMeasures the responsiveness of quantity demanded to a change in priceDeterminantsAvailability of close substitutesNecessities versus luxuriesDefinition of the market (food vs. ice cream vs. chocolate ice cream)Time horizon
22. Price Elasticity and Total RevenueIf demand for a good is elastic, price increases lead to lower total revenueIf demand for a good is inelastic, price increases lead to higher total revenue
23. Price Elasticity of SupplyMeasures the responsiveness of quantity supplied to a change in priceDeterminantsAvailability of inputs Time
24. Questions?