Ch. 6: Pricing System

What should the price of this product be? How many will be sold at that price?

• $9, 13 items

• $10, 15 items

• $8, 12 items

• $18, 18 items

Why is equilibrium important?

• Equilibrium determines the price and quantity that a product should be sold at

• Equilibrium determines the price that would be best for consumers

• Equilibrium determines the price that would be best for producers

• Equilibrium determines the break even point for producers

At what price is the greatest surplus?

• $18

• $12

• $10

• $2

At what price is the smallest shortage?

• $2

• $8

• $10

• $18

At $4 is the a surplus or shortage? How much of a surplus or shortage?

• Surplus of 15 items

• Shortage of 5 items

• Shortage of 15 items

• Surplus of 21 items

Where is the smallest surplus? How much of a surplus is there?

• At $18 there is a surplus of 24 items

• At $2 there is a surplus of 21 items

• At $10 there is a surplus of 3 items

• At $8 there is a surplus of 3 items

When there is a surplus what needs to happen to reach equilibrium?

• A rain check should be offered.

• The price must decrease.
• The price must increase.
• The quantity supplied must decrease.

What needs to happen when there is a shortage to reach equilibrium?

• A rebate needs to be offered.

• Prices need to rise to eliminate the shortage and reach equilibrium.
• Supply must decrease to reach equilibrium.
• Prices need to fall to eliminate the shortage.

Match the definition with the correct term

• Left shift in Demand

• Price and quantity decrease

• Left shift in Supply

• Price increases, quantity decreases

• Right shift in Demand

• Price decreases, quantity increases

• Right shift in Supply

• Price and quantity increase

Draw what happens to the graph for Coke when the price of Pepsi increases. (Make sure to label your graph!)

What happens to equilibrium as a result?