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Unit 3: Microeconomics

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Unit 3: Microeconomics. SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. . a. Identify and illustrate on a graph factors that cause changes in market supply and demand . .

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slide1

Unit 3: Microeconomics

SSEMI3 The student will explain how markets, prices, and competition influence economic behavior.

  • a. Identify and illustrate on a graph factors that cause changes in market supply and demand.
  • b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages.
  • c. Define price elasticity of demand and price elasticity of supply.
slide2

SSEMI3 The student will explain how markets, prices, and competition influence economic behavior.

  • a. Identify and illustrate on a graph factors that cause changes in market supply and demand.
slide3

Increase Demand

Price

Decrease

Demand

Demand

Quantity

slide4

SSEMI3 The student will explain how markets, prices, and competition influence economic behavior.

  • a. Identify and illustrate on a graph factors that cause changes in market supplyand demand.
slide5

Supply

Increase in Cost of production

Decrease

Supply

Price

Decrease in Cost of Production

Increase Supply

Quantity

slide6

A Price Ceiling is a maximum legal price BELOW the equilibrium.

  • It provides perverse incentives, causing a shortage.
  • Helps the Consumer
  • Ceiling, below, shortage(CBS)
slide7

A Price Floor is a minimum legal price ABOVEthe equilibrium

  • It provides perverse incentives, causing a surplus.
  • Helps the Producer
  • Floor, above, surplus (FAS)
slide8

Supply

5

4

Price Floor

Price

3

Equilibrium

2

Price Ceiling

1

Demand

1

2

3

4

5

Quantity

price controls ceiling
Price controls (ceiling)
  • Assume that a market is in equilibrium and there is no change in supply or demand; relative scarcity has not changed.
  • A government sets a legal price below the equilibrium (price ceiling)
  • Buyers will want to buy (more or less).
  • Suppliers will want to supply (more or less).
  • There is a (surplus or shortage).
  • Rent controls, doctors, prescription drugs
price controls floor
Price controls (floor)
  • Assume that a market is in equilibrium and there is no change in supply or demand; relative scarcity has not changed.
  • A government sets a legal price above the equilibrium (Price Floor)
  • Buyers will want to buy (more or less).
  • Suppliers will want to supply (more or less).
  • There is a (surplus or shortage).
  • Minimum wage, agricultural price supports
slide11

Unit 3: Microeconomics

SSEMI3 The student will explain how markets, prices, and competition influence economic behavior.

  • c. Define price elasticity of demand and price elasticity of supply.

Demand Inelasticity – demand that is not sensitive to price change

  • Demand Elasticity – demand is sensitive to price change

Supply Inelasticity – firms find it hard to change production in a given time period.

Supply Elasticity – producers can increase output without a rise in cost or a time delay

http://www.tutor2u.net/economics/revision-notes/as-markets-price-elasticity-of-supply.html

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