2015 day 5

On slates1. Sketch a perfectly

ineastic demand curve

2. Sketch a perfectly elastic demand

curve3. 2 examples of goods/services with

elastic demand4. 2 examples of goods/services with

inelastic demand

On slates1. Give an example of the law of demand from your Spring Break.

Something you bought, didn’t buy or witnessed

2. For each part of TRIBE, identify a change to the

Miami hotel market.

Changes to demand relay raceWinning group get +5 Quantitative Easing points2nd place gets +3, 3rd gets +1Stand up in lineOnly talk to next person

White boardsWhich part of TRIBE will change in the following scenarios to the

Tucson gasoline market? & increase or decrease

1. Summer vacation time2. Used cars get more expensive3. Alaskan oil spill, consumers think gas prices

will increase next month4. Sun Tran rates increase by 10%5. Tesla electric cars get cheaper6. New freeway connects Eastside with rest of Tucson

White boardsWhich part of TRIBE will change in the following

scenarios to the Spam market & increase or decrease?

1. US unemployment falls by 1%2. Price of bacon drops by 5%3. Restaurant prices increase after US minimum

wage increase4. TUSD stops selling school lunches, students

must bring lunch from home5. Median wage increases in Arizona

White boardsWhich part of TRIBE will change in the following

scenarios to the potato chip market? & increase or decrease

1. Americans try to eat healthier2. Consumers think price of potatoes will

decrease next month3. Hotdog prices plummet4. Your school stops selling school lunches,

students must bring lunch from home5. Population of US increases by 12%

White boardsWhich part of TRIBE will change in the following

scenarios to the potato chip market? & increase or decrease

1. Americans try to eat healthier2. Consumers think price of potatoes will

decrease next month3. Hotdog prices plummet4. Your school stops selling school lunches,

students must bring lunch from home5. Population of US increases by 12%

Bellringer• In your notes, write the minimum per hour I

would have to pay you to clean up this yard. Should take about 5 hours

Pretend there is no minimum wage and you could work for less than $7.90

Graph workers on board

• Jumping jacks market

Law of Supply

• As the price of a good increases, producers will produce more (,or try to) quantity. As the price of the good decreases, producers will produce less quantity.

P Qs and P Qs

The supply curve is always upward sloping

$

Q

S

For example….• Average prices of • Therefore…..

Graph one:

A Supply Curve

Price ofWidgets

Number of WidgetsSellers Want to

Sell

$1.00 10

$2.00 40

$3.00 70

$4.00 140

Producer Surplus• Difference between cost and sale price• IOW: profit

• Sale: $15• Cost: $10• PS = $5

For example….

In your groups

• Choose either a computer company or a car company

• Your boss wants your group to figure out how to produce MORE of your goods per year

• Consider every factor of production (land, labor, capital)

If price changes Q*supply,What changes supply?

4 Determinants of Supply• Price of production + or –• Resources• Taxes• regulation

4 Determinants of Supply• Expectations of future price• If future P$ might rise, hold inventory• If future P$ might fall, increase supply

4 Determinants of Supply• Sellers (increase or decrease)

4 Determinants of Supply• Technology

4 Determinants of SupplyMnemonic

• Price of Production

• Expectations

• Sellers (#)

• Technology

•PEST = supply determinants

• TRIBE = demand determinants

PEST Changes AssignmentWith 1 partner, see #2

1. For each part of PEST, identify one positive and negative change to your entrepreneurial idea and sketch a correctly drawn graph

2. Find an article either on your phone or in a financial magazine, write the headline, the market, part of PEST that is changing and graph it.

BR Full sheet1. How many pairs of flip flops do you own?2. What price did you or your parents pay for your favorites?

(estimate if you don’t remember) (If you don’t own a pair, explain why)

Now we will learn where prices come from

Trading Game• Flip flop market• Buyers maximize consumer

surplus• Sellers maximize producer

surplus

• Whole $1 prices• Top 2 players get 5

Quantitative Easing points

Supply/Demand game Closure 5. What happened to the equilibrium price in the different rounds?6. How would the price have changed if we doubled the number of buyers?7. How would the price have changed if we doubled the number of sellers?8. Did you like being a buyer or seller more, explain why?

White boards: Bellringer1. Which words would you

associate with demand?2. Which words would you

associate with supply?

Consumers

producers

buyers

salespeopleManagers

customers

growers

purchaser

shopper

entrepreneur

maker

creator

contractor

Diff between supply and DemandXbox 360 games

• Supply or demand change?• Determinant

released

Diff between supply and DemandWheat

• Supply or demand change?• Determinant

LocustsInfest Kansas

Diff between supply and DemandMexican food

• Supply or demand change?• Determinant

Diff between supply and Demandairline tickets

• Supply or demand change?• Determinant

Diff between supply and Demandgasoline

• Supply or demand change?• Determinant

Diff between supply and DemandDemand increases, decreases or no changeMarket: New Cars

Change: US government increases income tax rates

Diff between supply and Demand

Market: New Cars

Change: Price of steel decreases 15 %

Diff between supply and Demand

Market: New Cars

Change: population of US increases by 6 %

Diff between supply and DemandMarket: New Cars

Change: US media reports next year’s car models will be more expensive due to new environmental laws

Diff between supply and Demand

Market: New Cars

Change: gasoline prices increase to over $4 gallon

Diff between supply and Demand

Market: Sun Tran bus rides

Change: Average Tucson gets a 2% raise

Diff between supply and DemandMarket: Sun Tran bus rides

Change: Population of Tucson decreases for fifth straight year

Diff between supply and Demand

Market: Sun Tran bus rides

Change: Gasoline prices increase to $4

Diff between supply and DemandMarket: Smart phone apps

Change: prices of smart phones decreasing

Diff between supply and Demand

Market: Smart phone apps

Change: 10% increase in computer programming majors

Diff between supply and DemandMarket: Smart phone apps

Change: Consumers think android apps will no longer be free starting next month

Diff between supply and DemandRed Roses

Market: red roses

Change: prices of chocolate decreases

Diff between supply and DemandRed Roses

Market: red roses

Change: cost of fertilizer increases

Diff between supply and DemandRed Roses

Market: red roses

Change: Its February 14

Diff between supply and DemandRed Roses

Market: red roses

Change: Its February 16

Diff between supply and DemandOffice supplies

• Supply or demand change?• Determinant

Diff between supply and DemandNew cars

• Supply or demand change?• Unemployment rate rises

Diff between supply and DemandUsed clothing

• Supply or demand change?• Unemployment rate rises

Diff between supply and DemandDog food

• Supply or demand change?• Determinant

Diff between supply and DemandDog food

• Supply or demand change?• Determinant

Diff between supply and DemandSalsa

• Supply or demand change?• Determinant

Diff between supply and DemandSalsa

• Supply or demand change?• Determinant

CLOSED

Diff between supply and DemandSalsa

• Supply or demand change?• Determinant

Diff between supply and Demand Salsa

• Supply or demand change?• Determinant

Diff between supply and DemandSpurs Clothing

• Supply or demand change?• Determinant

Diff between supply and DemandSpurs Clothing

• Supply or demand change?• Determinant

On slates1. Where do you think

the price of gasoline comes

from?

OIL!!!

Oil Drilling

Crude oil from ground

Sent to refinery

Uses of Oil

2011 Oil Consumption Rankings (Source: CIA FACTBOOK) Amount (top to bottom)

#1 United States:19,150,000 bl/day #2 European Union13,680,000 bl/day #3 China:9,400,000 bl/day #4 Japan:4,452,000 bl/day #5 India:3,182,000 bl/day

Conclusion?

solve this problem?• Constant supply of oil, high demand• What to do? Substitutes?

Corn!• US government

provides incentives to grow corn for fuel

• Recent regulation has caused corn prices to increase since 2000

• If you were a farmer, what would you do?