Monday, January 31, 2011

Honors Business Economics: 1 February 2011

Beyond the Sound Bites

How Will the Egyptian Turmoil Affect the World Economy?

Standard feature:

The electronic edition of the Philadelphia Inquirer is available. We have the Sunday edition, available on Mondays, in addition to the Tuesday through Friday editions on the other days.

Please follow the steps below:

Click on the words "Access e-Inquirer" located on the gray toolbar underneath the green locker on the opening page.
Password: 10888

Chapter 6 Prices and Decision Making

Ch. 6 Sec. 1 Reading Strategy

Katrina Fallout

The Economic Impact of the BP Oil Spill, 7:27

In-class assignment: working with a partner, answer the following questions.

Is the Gulf Oil spill worse than Hurricane Katrina?
Could the damage be worse on the area?
How much did the Hurricane cost?
What three reasons could make it worse than Katrina?
What is the economic disruption?
What are the three drivers of the economy in New Orleans?
How will the decimation of these industries affect the economy?
How will tourism be effected?
How many are employed in this industry?
How is the oil and gas industry effected?
How much off-shore drilling in the U.S. takes place in the Gulf?
What is the lesson to be learned in this disaster?
Has there been innovation in preventing a disaster?

Brookings expert Amy Liu has been tracking the recovery of the Gulf Coast ever since Hurricane Katrina hit in 2005. In this week's @Brookings podcast, she discusses the enormous economic impact of the catastrophic BP Deepwater Horizon oil spill on New Orleans, the Gulf Coast region, and the nation.

The Global Economy and You

Advantages of Prices

Reading Check


In what way do prices perform the allocation function?

Allocations without Prices


Problems with Rationing

Reading Check


What are the differences between the price system and rationing?

Prices as a System

Reading Check


How do prices allocate resources between markets?

Ch. 6 Sec. 1 Review

In-class assignment: with a partner, identify the problems associated with rationing.

Case Study

I Bought It On eBay

Section 2 The Price System at Work

Economists develop economic models of markets with supply and demand curves in order to analyze and predict outcomes. In a competitive market, the forces of supply and demand establish prices. A temporary surplus drives prices down; a temporary shortage forces prices up. Eventually, the market reaches the equilibrium price where there are neither shortages nor surpluses. Changes in supply or demand can disturb the market, but the market will tend to find its new equilibrium with the help of temporary shortages and/or surpluses. Whenever supply or demand for a product fluctuates, the elasticity of the two curves affects the size of the price change. Competitive markets represent the ideal, but the lessons learned from them apply to other markets as well.

In-class assignment, working with a partner, answer the following.

In your own words, explain the price system.
Does one person make a pencil?
Do it take many people and cultures to produce even simple goods such as pencils?
Does it take cooperation?
Is it likely that the differences between people would make them hate each other if they met?
Then what brought all these people together?
What does the price system foster if left unregulated according to Friedman?

Milton Friedman, Free to Choose (explains the price system), 2:11

Guide to Reading

Section Preview

Content Vocabulary

economic model

equilibrium price


In-class assignment, with a partner, answer the following.

As illustrated in the video, draw the graph.
Which direction does the demand curve go?
Which direction does the supply curve go?
Why (for each curve)?
What is the intersection of the curves called?
What does the idea of the surplus entail?
What is the red (in the video) section called?
What lines define the consumer surplus?
Can prices be determined as a result?

Equilibrium price and surplus, 6:27

Description of equilibrium price, consumer surplus, producer surplus and social surplus using supply and demand diagrams.


Academic Vocabulary

Reading Strategy

Companies in the News

Want prime seats? Get ready to bid?

The Price Adjustment Process

A Market Model

Figure 6.1 Market Equilibrium



Figure 6.2 Surpluses and Shortages


Equilibrium Price

Reading Check


How do surpluses and shortages help establish the equilibrium price?

Explaining and Predicting Prices

Change in Supply

Figure 6.3 Changes in Prices

Change in Demand

Change in Supply and Demand

The Importance of Elasticity


Real Estate Agent
Real estate agents, among others such as actors (including voice actors), artists, novelists, freelance writers, and similar creative artists as talents are generally compensated on a "per job" basis, and thus are not treated as employees; as freelancers, they file a 1099 form for their taxes. They are not, strictly speaking, an employee of a company. The health care provisions passed last year require them to purchase health care and to be treated as regular employees of companies.
Prices and Competitive Markets

Reading Check


How does the elasticity of a good affects its price?

Business Week Newsclip

What's Raining on Solar's Parade?
Solar Power: Why Economics Matters, 7:12

Section 3 Social Goals and Market Efficiency

Prices work as a system to allocate resources between markets. However, if prices are fixed in one market, temporary shortages and surpluses tend to become permanent. A price ceiling, such as rent control, is one form of fixed price; a price floor, such as the minimum wage, is another example. Agriculture is especially hard-hit by price changes, because demand and supply tend to be inelastic, while weather often causes the supply curve to change. Therefore, to help farmers, the federal government established the Commodity Credit Corporation (CCC), an agency in the Department of Agriculture. The CCC then used a target price, which is essentially a price floor, to help stabilize farm prices. As a result, over the years, the government has established other forms of support for agriculture in the economy.

Guide to Reading

Section Preview

Content Vocabulary
price ceiling

Price Floors and Price Ceilings, 5:59

In-class assignment: with a partner, answer the following:

What happens when the government interferes with the market mechanism by artificially imposing a "better" price?

What may interfere with the market?
How does the video define price floor?
Who is the price floor meant to protect?
What is the seller protected from?
What kinds of businesses would warrant such help?
Rather than impose an artificial price on the market resulting in all manner of other problems is there any way to manage the market to get the equilibrium price up to Pf?
Define price ceiling.
Who is a price ceiling meant to protect?
Would you rather pay a higher price for gas if you knew you could get it, or, would you rather pay a lower price for gas but take the chance none would be available?
Are there ways to make a lower price of gas available instead of imposing a government price?

minimum wage

Minimum Wage, 2:30

In-class assignment, with a partner, answer the following:

Before Congress, who testifies in favor of minimum wage?
Do labor unions generally work for minimum wage?
Why do labor unions favor a minimum wage?
Which groups are often harmed by the minimum wage?
Are small businesses harmed?

price floor
target price
nonrecourse loan
deficiency payment

Academic Vocabulary

Reading Strategy

Issues in the News

Minimum Wage Rise Hurts Students

Distorting Market Outcomes

Price Ceilings

Figure 6.4 Price Ceilings

Price Floors

Figure 6.5 Price Floors

Reading Check


What are the negative and positive aspects of price ceilings and price floors?

Agricultural Price Supports

Loan Supports

Deficiency Payments

Figure 6.6 Deficiency Payments

Conservation "Land Banks"

Reforming Price Supports

Continued Agricultural Support

Reading Check


What has been the effect of agricultural price supports?

When Markets Talk

Reading Check


Can you think of any other examples of markets "talking"? Explain

Did You Know?

Profiles in Economics

Margaret (Meg) Whitman, eBay

Debates in Economics

Should College Athletes Be Paid?

Ch. 4 Prep


Multiple Choice Quiz


Crossword Puzzle




Ch. 5 Prep

Chapter 5 Supply Multiple Choice Quiz


Chapter 5 Puzzle


Chapter 5 Supply Flashcards


Ch. 6 Prep

Chapter 6: Prices and Decision Making
Multiple Choice Quiz


ePuzzle Concentration


Academic, Glossary, People/Places/Events


Ian Hunter, How's Your House, for the New Orleans Musicians Relief Fund

Email (or hand in hard copy) to

Tuesday HW
1. p. 146, #1-2, 4
Wednesday HW
1. p. 146, #5; p. 147, #1-2
Thursday HW
1. p. 154, #1, 3, 4
Friday HW
1. p. 161, #1