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Supply and Demand Review. Improvements in technology reduce the cost of producing DVD players. Price. S. S 1. P 1. Supply Price Quantity. P 2. D. DVD Player Market. Q 1. Q 2. Quantity. How will this effect VCRs?. Demand Price Quantity. Price. S. P 1. P 2. D. D 1.

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slide2

Improvements in technology reduce the cost of producing DVD players

Price

S

S1

P1

Supply

Price

Quantity

P2

D

DVD Player Market

Q1

Q2

Quantity

slide3

How will this effect VCRs?

Demand

Price

Quantity

Price

S

P1

P2

D

D1

VCR Player Market

Q2

Q1

Quantity

slide4

How will this effect DVD Disks?

Price

Demand

Price

Quantity

S

P2

P1

D1

D

DVD Disk Market

Q1

Q2

Quantity

slide5

How will this effect VCR Tapes?

Demand

Price

Quantity

Price

S

P1

P2

D

D1

VCR Tape Market

Q2

Q1

Quantity

slide6

Environmental regulations reduce the number of power plants built in California

Price

S1

S

P2

Supply

Price

Quantity

P1

D

California Electricity Market

Q2

Q1

Quantity

slide7

How will this effect electricity produced in other states?

Demand

Price

Quantity

Price

S

P2

P1

D1

Other States Electricity Market

D

Q1

Q2

Quantity

slide8

How will this effect natural gas?

Price

Demand

Price

Quantity

S

P2

P1

D1

D

Natural Gas Market

Q1

Q2

Quantity

slide9

How will this effect energy-efficient furnaces?

Price

Demand

Price

Quantity

S

P2

P1

D1

Energy-Efficient Furnace Market

D

Q1

Q2

Quantity

slide10

Assume there is a new 200 percent excise tax on the sale of yachts

S1

Price

S

P2

Supply

Price

Quantity

P1

D

Yacht Market

Q2

Q1

Quantity

slide11

How will this effect luxury cars?

Demand

Price

Quantity

Price

S

P2

P1

D1

Luxury Car Market

D

Q1

Q2

Quantity

slide12

How will this effect boat marinas?

Demand

Price

Quantity

Price

S

P1

P2

D

D1

Boat Marinas Market

Q2

Q1

Quantity

slide13

How will this effect yacht workers?

Demand

Price

Quantity

Price

S

P1

P2

D

D1

Yacht Workers Market

Q2

Q1

Quantity

slide14

Assume the government imposes a tariff on foreign steel

S1

Price

S

P2

Supply

Price

Quantity

P1

D

Foreign Steel Market

Q2

Q1

Quantity

slide15

How will this effect steel produced in the United States?

Demand

Price

Quantity

Price

S

P2

P1

D1

U.S. Steel Market

D

Q1

Q2

Quantity

slide16

How will this effect automobiles?

S1

Price

S

P2

Supply

Price

Quantity

P1

D

Automobiles Market

Q2

Q1

Quantity

slide17

How will this effect auto workers?

Demand

Price

Quantity

Price

S

P1

P2

D

D1

Auto Workers Market

Q2

Q1

Quantity

why profits and losses are our friend
Why Profits and Losses are our Friend…
  • People of a nation are better off if their resources produce _____________ __________________________________________
  • Users of resources are encouraged to undertake productive projects andless productive use of resources are discouraged.
  • ___________________ perform this function.
what is the function of profit and loss in a market economy
What is the function of profit and loss in a market economy?
  • ______________ provide rewards to those who transform resources into something of greater value.
  • ______________ are just as important! They impose discipline on people, businesses and organizations that are not producing valuable goods and services.
  • ___________________________________________
slide22

The Circular Flow of Economic Activity

Supply

Resources

resources

G&S

Households

G&S

resources

$

Supply

G&S

$

$

$

$

$

$

Taxes & Resources

G & S & $$

$

$

Demand

Resources

$

Demand

G&S

Government

Land, Labor, Capital

Taxes &

G & S

G & S & $$

$

$

$

$

$

resources

$

$

$

$

$

Firms

resources

G&S

G&S

Resource

Market

Product

Market

circular flow questions
Circular Flow Questions
  • How do individuals and families in households depend on people in businesses?
  • How do businesses depend on households?
  • What is the role of government in the circular flow of economic activity?

_______________________________

earning income
Earning Income
  • What do you have to do to earn a high income?
  • How do you know that others value the services or goods you provide?
circular flow implications
Circular Flow Implications
  • A change in the system influences the entire system.
  • ________________________________________________________________________________
  • Income losses by producers will reduce incomes for households.
income variation
Income Variation
  • College students are rewarded for studying.
  • Star athletes and entertainers are rewarded for their specialized skills.
  • Entrepreneurs are rewarded for their productive innovations and risk-taking.
  • Why does Tiger Woods earn more than a nurse?
slide27

#9 Production of goods and services people value, not just jobs, provides the source of high living standards.

slide28

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. — ADAM SMITH (1776)

slide29

If jobs were the key to high incomes, we could easily create as many as we wanted.

All of us could work one day digging holes and the next day filling them up.

We would all be employed, but we would also be exceedingly poor because such jobs would not generate goods and services that people value.

____________________________________________________________________________________________________________________________________________
when the government creates jobs

Government pays for these jobs either through ___________________________

It crowds out ________________ jobs and spending.

There is nothing like profit and loss that will direct funding toward productive projects in government. That is, ____________________________________ __________________________________________________________________________________________

When the government “creates” jobs
do spending programs create jobs of value

Politicians and proponents of government spending projects are fond of bragging about the jobs created by their spending programs and they exaggerate program benefits.

Agricultural Adjustment Act (AAA) of 1933

2009 “Cash for Clunkers” Program

Do spending programs create jobs of value?
jobs of value matter

It is not simply more jobs that improve our economic well-being but _________________ ____________________________________________________________________

Jobs of value matter!
question for thought

When governments become heavily involved in subsidizing and granting favors to some businesses at the expense of others, how will this incentive structure influence the efficiency of resource allocation?

Question for Thought: