Bellringer1. Which allocation method does your family use to

distribute resources?2. Which method do sellers ebay use?

3. Which method is used on Wall Street?Brute force

First come, first serveRationing (usually equal)Rationing by committeeBased on need (poorest)

Contest basedRandom lottery

Auction – willing to pay

Economists like Auction tooWe use price because it lowers opportunity cost

Brute forceFirst come, first serve

Rationing (usually equal)Rationing by committeeBased on need (poorest)

Contest basedRandom lottery

Auction – willing to pay

Where do prices come from?• XBOX1 OR PS4• Demand• The combination of how much people will buy at a

certain prices, at a certain time period (week, month, year etc)

• Why important for entrepreneurs or managers?

Lower pricemore sold

In one weekHow many Subway subs would you buy at

the following prices?Add up your table

Price Footlongs

$1.00 $2.00 $5.00 $7.00 $9.00

Lets graph one table’s answersTitle _________________

Demand ScheduleCookiesPrice Quantity Demanded per day

$0.20 7$0.40 4$0.60 2$0.80 1$1.00 1$1.20 0

Demand Schedule

CookiesPrice QD*Day

$0.20 7$0.40 4$0.60 2$0.80 1$1.00 1$1.20 0

P $

Quantity

Demand Curve

1.20

1.000.80

0.60

0.40

0.20

1 2 3 4 5 6 7

Law of DemandLaw of Demand: As price declines, quantity demanded

increases. As price increases, quantity demanded decreases

Law of Demand: P Therefore Q demand P Therefore Q demand

Demand curve always slopes down

Why do businesses care?• Demand predicts revenue

• Revenue = Price X Quantity sold

CookiesPrice QD*Day Revenue

$0.20 7$0.40 4$0.60 2$0.80 1$1.00 1$1.20 0

On your BR4. 3 goods or services you buy more of when they go

on sale5. An example of something you try to conserve

because its expensive6. What price should this company choose if they

want to maximize revenue?

Currently organ donation in the US is done by donation only, and first come first serve. 4. Write a paragraph

comparing and contrasting this allocation method with an auction for kidneys where people on the waiting list could buy kidneys from donors. Which method do you think is best?