Lesson 2 Review EVALUATE DIRECTIONS: Answer these questions below to test your knowledge of this lesson. My income affects demand because 2. My change in preference in a product affects demand because 3. The amount of people in a market affects the demand of a good because 4. In 4-5 sentences explain how supply, demand, and the use of substitutes in the market affected the prices in any of the examples from this lesson. 5. Describe the Law of Demand: 6. Describe the Law of Supply: lifelong California Economics LEP 2 HS - L4L Economics (2021) 17Supply ELAEORATE DIRECTIONS: llezld the information below This information Will help you WNW\" the qllehn zit. the end of this lesson. ' i . - - g ' vice 'it different It you own a business or sell :1 product, you have to gure out how much to sell your produnt or ser r prices. Prime (\"Tends on huw murh it rested to build or create the product, To get an idea (if supply, it's helpful to use the Supply Schedule, which shows different quantities ofa product '41 11\" possible price points. For suppliers, the higher the cost of a product. the more they want to sell because they um get a higher prot. It's an incentive to the busmess owner to sell more. This idea is also known as the Law of Supply. Just like demand, there is also a graph, which indicates the general rule of supply. called the Supply Curve. An example of a supply curve is shown below. It is different than demand because the higher the price, the higher the amount supplied because the people selling the product get a higher amount of money for the product Example of u Supply Schedule Example ofu Supply Curve c Mrmw Hill Eduiannn 1'1. |If8|0ng Calitornia Economics LE? 2 H5 - L4L Ecnnomics (2021) M Price Ceiling and Price Floor ELABORATE DIRECTIONS: Read the information below. This information will help you answer the questions at the end of this lesson. Limits on Price: The United States has what's known as a modified free enterprise system and can interfere in the market to achieve a goal, like being able to put a limit on price. The highest a price can be for a good or service is called price ceiling because it hit the top of what it's able to be. At times, law makers can place a limit on how low an item can cost, which is called price floor because it's the lowest it can go, so it hits the ground. The easiest way to think about price ceiling and price floor is by thinking about a house. Price Ceiling Price Floor Effect of a Price Floor Excess Supply Supply Price Floor Market Price Price - F- - De Aw of De Demand Quantity Market Quantity Demanded Quantity Supplied Quantity McGraw Hill Education lifelong California Economics LEP 2 HS - L4L Economics (2021) 15are on Demand ,,_ , n l u y. u .r , 7* \"f l ' 111R liCTIONS: Read the information lwlnw and answvr the questions at the lmttom (If this page. For ' - 7 "i! :f 1' 'r 7:4? "\""O \"\\fm'lll'dliun. please see pt 99-] El in your textbook. . , . . an ac" Substitution: '1 product. or service that can be replaced by something similar to it' 'Tn'nird Above is an example of the Demand Curve, which shows the Law of Demand. How does this graph demonstrate the Law of Demand" In order for businesses to be successful, they need to anticipate what consumers want or demand. so they know how much of an item to supply, Sometimes the entire demand curve shifts due to something besides price. like advertisements or changes in consumer income, but the demand curve only changes based on price, Price impacts what you see on the chart. If there is a product related to what is being demanded, it's called substitution because it can be used in place of other products. An example is if people treat butter and margarine the same or as substitutes. an increase in price of butter will cause an increase in the demand for margarine and visa versa. I: Matinu' Hill I'lduzutiun ll: . 'Iflong California Economics LB) 2 HS' L4L ECONOmiCS (2021] 13 Textbook Based Questions EXPLORE DIRECTIONS: Read your textbook and answer the following questions. raw Explain how supply changes and affects price. (p. 164) Explain how price can affect demand. (p. 165) Can you think of any price controls put in place by the government? (p. 168-169) Describe why the government intervenes with the price of agricultural products or farms. (p. 169) Describe what target price is. (p. 170) What are the seven goals of the American Free Enterprise System? (p. 171) 1. 2. 3. A 5. 7. lifelong California Economics LEP 2 HS - L4L Economics (2021)