Beyond the Sound Bites
How Will the Egyptian Turmoil Affect the World Economy?
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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
Summarizing
In what way do prices perform the allocation function?
Allocations without Prices
Rationing
Problems with Rationing
Reading Check
Contrasting
What are the differences between the price system and rationing?
Prices as a System
Reading Check
Identifying
How do prices allocate resources between markets?
Ch. 6 Sec. 1 Review
In-class assignment: with a partner, identify the problems associated with rationing.
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
surplus
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.
shortage
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
Surplus
Shortage
Figure 6.2 Surpluses and Shortages
Cf. http://glencoe.com/sites/common_assets/socialstudies/in_motion_08/epp/EPP_p150.swf
Equilibrium Price
Reading Check
Summarizing
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
Careers
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
Explaining
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
Analyzing
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
Summarizing
What has been the effect of agricultural price supports?
When Markets Talk
Reading Check
Examining
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
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter4/
Multiple Choice Quiz
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter5/self-check_quizzes.html
Crossword Puzzle
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_08/ch05/index.html
Flashcard
Cf. http://www.glencoe.com/qe/efcsec.php?qi=15424
Ch. 5 Prep
Chapter 5 Supply Multiple Choice Quiz
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter5/self-check_quizzes.html
Chapter 5 Puzzle
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_08/ch05/index.html
Chapter 5 Supply Flashcards
Cf. http://www.glencoe.com/qe/efcsec.php?qi=15424
Ch. 6 Prep
Chapter 6: Prices and Decision Making
Multiple Choice Quiz
Cf. http://glencoe.mcgraw-hill.com/sites/0078747643/student_view0/unit2/chapter6/self-check_quizzes.html
ePuzzle Concentration
Cf. http://www.glencoe.com/olc_games/game_engine/content/gln_ss/epp_05/chapter06/index.html
Academic, Glossary, People/Places/Events
Cf. http://www.glencoe.com/qe/efcsec.php?qi=15429
Ian Hunter, How's Your House, for the New Orleans Musicians Relief Fund
Email (or hand in hard copy) to gmsmith@shanahan.org.
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
