The Price System
Chapter 21
Demand, Supply & Prices
Setting Prices
Producers want high prices.
Consumers want low prices.
Prices must be high enough to make a profit
and low enough to attract consumers.
Shortages cause prices to increase. D>S
Surpluses cause prices to decrease. D<S
Where producers and consumers wants
intersect is how prices are determined. This
is called the market or equilibrium price.
Graphing exercises.
Setting Prices
Price ceilings are limits on businesses on
how much they can charge for a good or
service. These are VERY rare in our
economy. Ex. Is rent controls in NYC
Price floors are limits on how little businesses
can charge for a good or service. These
prices are kept low by subsidies to the
industry. These are not very common any
more. Ex. Is milk prices
Consumers and producers largely determine
prices in our economy today.
Setting Prices
What are the advantages of our
price system in Capitalism?
–Prices are neutral
–Prices are flexible
–Prices offer choice
–Prices are familiar
Practice and exit ticket
Graph the chart at the bottom of p. 74.
– Label all 10 points!
– Discuss
Graph one of the schedules on p. 75 &
label correctly. Raise your hand when
done to be checked.
Complete the final graph on a separate
sheet and turn in as your exit ticket.
Homework
Read through the selected pages of
chapter 23 to complete the questions for p.
74.
Due tomorrow.