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Financial Statistics

Supply. quantity. Demand. Financial Statistics. price. Chapter 2.3: Supply & Demand. DO NOW. Raise your hand… How many people would be willing to buy a new video game for $1? For $20? For $50? For $75? For $100? For $200? Does our scatterplot have a trend? What is it?.

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Financial Statistics

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  1. Supply quantity Demand Financial Statistics price Chapter 2.3: Supply & Demand

  2. DO NOW Raise your hand… • How many people would be willing to buy a new video game for $1? • For $20? • For $50? • For $75? • For $100? • For $200? • Does our scatterplot have a trend? What is it?

  3. Demand Function quantity Features: • Relates price to quantity • Negative slope: as price increases, quantity demanded decreases Demand price

  4. Supply Function Now think about the video game problem from the game company’s standpoint (the supplier). • If you are only able to sell games for $1 a piece, how many would you want to produce? • If you are able to sell games for $50 a piece, how many would you want to produce? • If you are able to sell games for $100 a piece, how many would you want to produce?

  5. Supply Function Supply quantity Features: • Relates price to quantity • Positive slope: as price increases, quantity supplied increases price

  6. Markup Most retail companies that sell a product have to buy it from a supplier at a wholesale price. Then, the retail company increases the price by a certain amount, called a markup, so it can make a profit. The amount for which the retailer sells the product is the retail price. • Suppose Gamestop purchases Grand Theft Auto V from the video game company for $20 per game. Gamestop charges its customers $59.99 for the game. What is the markup? $59.99 – 20 = $29.99 • What is the percent markup? • What is the retail price of the game if another store marks up the wholesale price by 200%?

  7. How Price Affects Supply & Demand quantity Supply The supply & demand functions for a video game are given in the graph below. • What is the price & quantity at equilibrium? • What happens if the price is set at $40? • What happens if the price is set at $75? Demand price 16 million $59.99

  8. Shifts in Supply & Demand Curves #1. It becomes known that an electronics store is going to have a sale on their video games 3 months from now. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  9. Shifts in Supply & Demand Curves #2. The workers who produce the video games go on strike for over two months. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  10. Shifts in Supply & Demand Curves #3. The workers who produce the video games receive a $2 per hour wage increase. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  11. Shifts in Supply & Demand Curves #4. When the average price of movie tickets rises, it has an effect on the purchase of video games. How is the supply and demand of video games affected? • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  12. Shifts in Supply & Demand Curves #5. The price of business software, a product also supplied by video game producers, rises. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  13. Shifts in Supply & Demand Curves #6. A reputable private research institute announces that children who play video games also improve their grades in school. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  14. Shifts in Supply & Demand Curves #7. Because of the use of improved mass production techniques, the amount of labor necessary to produce games decreases. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  15. Shifts in Supply & Demand Curves #8. The price of video game systems increase. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  16. Shifts in Supply & Demand Curves #9. The popularity of video games increases in world markets. At the same time, new technology lowers production costs by a proportional amount. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease?

  17. Exit Ticket 1. A large firm enters the video game business with a new line of exciting games. • Which is affected, supply or demand? • Draw a diagram showing the direction of the shift. • Does the price at equilibrium increase or decrease? • Does the quantity at equilibrium increase or decrease? 2. Suppose Best Buy marks up its video games by 210%. If it costs the store $25 per game, what is the retail price Best Buy charges its customers?

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