Where does the

price of a good or service

come from?

Economic Concepts

Supply and Demand Determines Prices

Supply Demand

Supply

You own a tomato businessThis year’s harvest was great, the

supply is HighYou have too many tomatoes, you have

to get rid of them fastYou will lower the price to get them to

buy

Supply

You own a tomato businessThis year’s harvest was bad, the

supply is LowTomatoes are scarce If people want them they will fight for

themYou will raise the price to make more

money

Demand

You own a businessPeople LOVE your product, the

demand is HighYou will Raise the Price to make more

money

Demand

You own a businessPeople HATE your product, the

demand is LowYou will lower the price to get them to

buy

Supply and Demand

HIGH SUPPLY …LOW PRICE

Silly Bands Flip Flops Chevy Aveo 32 inch HDtv

LOW SUPPLY …HIGH PRICE

Gold Bracelets Pair of Jordan's Bugatti 108 inch HDtv

Supply and Demand

HIGH DEMAND …HIGH PRICE

iPad Fuel Efficient Cars Pistachios

LOW DEMAND …LOW PRICE

Coby Tablet Gas Guzzler Cars Walnuts

Supply and Demand

Supply

Demand

Economic Concepts

Supply

Price

Quantity

Supply$10

$9

$8

$7

1 2 3 4

Economic Concepts

Demand

Price

Quantity

demand

$10

$9

$8

$7

1 2 3 4

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

SurplusYou made too many

1 pizzaX $9 $9

throw out on 2 extras

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Deficitmade too few

1 pizzaX $7 $7

Missed out on 2 sales

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Equilibrium

Economic Concepts

Supply and Demand

Price

Quantity

Supply

demand

$10

$9

$8

$7

1 2 3 4

Equilibrium

2 pizzaX $8 $16

perfect

Supply and Demand

How many Pizza Places in Rocky Mount? Pizza Hut Pizza King Little Caesar’s Papa John’s Domino’s Hema’s Frank’s Pyramid

Large Supply

of Pizza!!

!

Supply and Demand

Let’s Open a Pizza Place! Gereau’s Pizza

What happens

next?

Rocky Mount Pizza

Supply and Demand

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

$10

After Gereau Pizza

Supply goes up

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

Economic Change

Town Council writes a new ordinance “All Pizza must use FRESH

INGREDIENTS”Most pizza places go out of businessSupply goes DOWN

Economic Concepts

Supply goes down

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

Economic Concepts

Supply and Demand

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

Breaking News

Pizza is

Healthy

Before Gereau Pizza

Demand Goes Up

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

Breaking News

Pizza is

made from

Humans!!!

Before Gereau Pizza

Demand goes down

Price

Quantity Sold

Supply

demand

$5

$10

$15

1 2 3 4

Supply and Demand

If you buy goods

or

If you sell goods