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Micro Lesson 5 Equilibrium Price and Quantity

On Marker Boards • Draw a supply curve and demand curve on the same graph. • Label everything. • Find a point on the graph that represents the price and quantity that should be charged. • Label that point “E”.

Equilibrium Price

The Price Adjustment Process • • P allows S to be = to D. Surplus: Qs > Qd Shortage: Qd > Qs Equilibrium P: Qs = Qd

Back to Basics • • Input costs Productivity Technology Taxes/Subsidies Seller Expectations Regulations # of sellers • Income • Tastes • P change in substitute/ complement • Consumer expectations • # of buyers

Story Time • In a moment you will draw from a hat. • The paper you draw will have something on it that shifts a curve, like “input costs. ” • With your group, compose a narrative about a consumer or producer who is affected by your topic. • Each group will share their stories, and the rest of the class will try to figure out which curve shifts and which way it shifts. • You’re telling a story here…. ten sentence minimum!

Make Your Paper Look Like This: • S D P Q • 1. • 2. • 3…. (down to 9. ) P S D Q

• • • Activity Read the scenario Determine if: Supply is Affected/How Demand is Affected/How Equilibrium Price is Affected/How Equilibrium Quantity is Affected/How • Top of Sheet has: S D P Q • Use Up/Down Arrows & Equal Sign to Show How Each is Affected • Draw new Supply or Demand Curves for each scenario (with arrows)!

Activity • Scenario 1: • Market - sugar produced in the U. S. • News Event - The U. S. government reduces the amount of sugar that U. S. companies may import. As a result , U. S. candy companies buy more sugar from domestic producers.

Activity • Scenario 2: • Market – candy • News Event – Because of a federal policy designed to protect U. S. sugar producers, the price of sugar increases.

Activity • Scenario 3: • Market – corn • News Event – Because of high sugar prices, soft-drink bottlers use more corn syrup as a substitute for sugar.

Activity • Scenario 4: • Market – sugar market in Caribbean countries • News Event – Buyers in the U. S. are no longer allowed to buy sugar from Caribbean countries.

Activity • Scenario 5: • Market – unskilled labor market in Caribbean countries • News Event – Because of decreased sugar exports to the U. S. , sugar plantations lay off workers, & some sugar mills close.

Activity • Scenario 6: • Market – marijuana in Caribbean countries • News Event – Because of reduced demand for sugar grown in the Caribbean, some sugar growers begin to grow marijuana instead.

Activity • Scenario 7: • Market – unskilled labor market in the U. S. • News Event – Because of higher unemployment in their countries, some Caribbean workers begin to immigrate illegally to the U. S. to find work.

Activity • Scenario 8: • Market – soybeans produced in the U. S. • News Event – As higher sugar prices lead more U. S. farmers to grow sugar cane, the production of soybeans decreases.

Activity • Scenario 9: • Market - U. S. farm land • News Event - Higher crop prices & profits entice more people to start farming.

Activity • Scenario 10: • Market – World Oil Market • News Event – OPEC (Organization of the Petroleum Exporting Countries) announces a significant reduction in the amount of oil that will be produced by each member.

Activity • Scenario 11: • Market – diesel fuel • News Event – The price of crude oil doubles.

Activity • Scenario 12: • Market – trucking services • News Event – Prices for diesel fuel increase dramatically.

Activity • Scenario 13: • Market – home heating oil • News Event – Extremely cold weather hits northeastern states where heating oil is a major fuel for home furnaces.

Activity • Scenario 14: • Market – Wood • News Event – Because of high fuel-oil prices, people use wood-burning fireplaces more.

Activity • Scenario 15: • Market – frozen vegetables • News Event – Trucking firms charge higher prices to deliver products to grocery stores.

Activity • Scenario 16: • Market – airline travel • News Event – Jet fuel prices rise rapidly.

Activity • Scenario 17: • Market – airline workers • News Event – Airlines cut back on flight schedules as high ticket prices result in fewer people flying.

Activity • Trade papers with another student.

• • • # #1: #2: #3: #4: #5: #6: #7: #8: #9: Activity-Answers S D P Q = Up Up Up Dn = Up Up Up = Dn Dn Dn Up = Dn Up Dn = Up Up Up

• • • Activity -Answers # S D P Q #10: Dn = Up Dn #11: Dn = Up Dn #12: Dn = Up Dn #13: = Up Up Up #14: = Up Up Up #15: Dn = Up Dn #16: Dn = Up Dn #17: = Dn Dn Dn