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SKILL-BUILDER :

SKILL-BUILDER :. When Cabbage Patch Dolls and Bey Blades started going out of style… Was that a change in demand or supply? Why?. Objective: Graph price equilibriums, ceilings, and floors; analyze arguments for and against each Guiding Question: Should there be a minimum wage?.

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SKILL-BUILDER :

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  1. SKILL-BUILDER: When Cabbage Patch Dolls and Bey Blades started going out of style… Was that a change in demand or supply? Why?

  2. Objective: Graph price equilibriums, ceilings, and floors; analyze arguments for and against each Guiding Question: Should there be a minimum wage? 2.5a: Supply & Demand [Price Limits]

  3. What Does the Market “Tell Us?” Smith’s idea of an “invisible hand” argues that the market will operate well if individuals act out of self-interest. In terms of supply and demand, this means price will act as a signal to tell us what buyers want and don’t want based on what they’re willing to buy.

  4. Price Equilibrium • If we graph supply and demand together, the intersection represents the price at which we have the most possible buyers at the lowest possible price. • This point is called equilibrium. $50 Equilibrium Price This graph shows supply and demand, and the point where the lines meet is the equilibrium price: $50

  5. Price Ceiling • If a maximum price is set below equilibrium, that is called a price ceiling. $50 $25 Max. Price Who benefits? Who loses? Even though people would pay $50 for a month of electricity, the government could set a ceiling at $25/month

  6. Price Floor • If a minimum price is set above equilibrium, that is called a price floor. Min. Price $60 $50 Who benefits? Who loses? On the other hand, the government could set a floor at $60/month for electricity even though more people would buy it for $50.

  7. Arguments For and Against: Ceilings • Price ceilings can lead to shortages. • Ceilings make the good cheaper to buy and accessible to more people. For example, the government caps the price of AIDs medication. Why?

  8. Arguments For and Against: Floors • Price floors can lead to surpluses. • Intended to assist a certain group, and can help those with a lower income make more money. In your opinion, is minimum wage a justified price floor? Why or why not?

  9. Price Floor or Ceiling? • The government says that landlords cannot charge more than $500 for rent CIELING • What if war Veterans cannot be paid less than $10 an hour? FLOOR • Office space cannot exceed $200 thousand dollars CEILING • Congress is considering a law that would limit ambulance services so that they could not surpass $500 a ride CEILING • The government declared that the price paid for a bushel of corn can’t fall below $15 FLOOR Set up a supply and demand graph of each price limit. Be sure to indicate: price, quantity, supply, demand, equilibrium, and the set-price.

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