Economics ch 6
Chapter 6
Balancing the Market
The point at which quantity supplied come together is known as Equilibrium
Market Disequilibrium
If the market place or quantity supplied is anywhere but at the equilibrium price, the market is in a state called disequilibrium
Excess Demand
Occurs when quantity demand is more than quantity supplied
Excess Supply
Occurs when quantity supplied exceeds quantity demand
The interaction between buyers and sellers (Market Forces) will always push the market back toward equilibrium
Price Ceilings
In some cases the government steps in to control prices. These intervention appear as price ceilings and price floor
Price Ceiling is a maximum price that can be legally charged for a good, to keep them from coming too expensive
Ex. Rent control reduces quantity and quality of houses
Helps some, harms others
If the price ceiling is too low, demand will increase but supply while likely from
Long waiting list, bribery and discrimination
Price Floor
A minimum price, set by the government, that must be paid for a good or services
Federal government sets base min. wage
States can set their own higher
The minimum wage os set above the market equilibrium wage rate, the results is a decrease in employment or an excess supply of labor
Price floor are used for many farm products around the world
When the price dropped, the U.S gov. created by buying excess crops
In 1996- US abolished these programs and instead offers farmers emergency financial aid when need
Shift in supply
Understanding a shift
Since market tend toward equilibrium, a change in supply will set market force in motion that lead the market to a new equilibrium price and quantity sold
Excess Supply
A surplus is a situation in which quantity supplied is greater than quantity demanded. If a surplus occurs, produces reduce prices to sell their products. This creates new market Equilibrium
A Fall in Supply
The exact opposite will occur when supply is decreased. As
Balancing the Market
The point at which quantity supplied come together is known as Equilibrium
Market Disequilibrium
If the market place or quantity supplied is anywhere but at the equilibrium price, the market is in a state called disequilibrium
Excess Demand
Occurs when quantity demand is more than quantity supplied
Excess Supply
Occurs when quantity supplied exceeds quantity demand
The interaction between buyers and sellers (Market Forces) will always push the market back toward equilibrium
Price Ceilings
In some cases the government steps in to control prices. These intervention appear as price ceilings and price floor
Price Ceiling is a maximum price that can be legally charged for a good, to keep them from coming too expensive
Ex. Rent control reduces quantity and quality of houses
Helps some, harms others
If the price ceiling is too low, demand will increase but supply while likely from
Long waiting list, bribery and discrimination
Price Floor
A minimum price, set by the government, that must be paid for a good or services
Federal government sets base min. wage
States can set their own higher
The minimum wage os set above the market equilibrium wage rate, the results is a decrease in employment or an excess supply of labor
Price floor are used for many farm products around the world
When the price dropped, the U.S gov. created by buying excess crops
In 1996- US abolished these programs and instead offers farmers emergency financial aid when need
Shift in supply
Understanding a shift
Since market tend toward equilibrium, a change in supply will set market force in motion that lead the market to a new equilibrium price and quantity sold
Excess Supply
A surplus is a situation in which quantity supplied is greater than quantity demanded. If a surplus occurs, produces reduce prices to sell their products. This creates new market Equilibrium
A Fall in Supply
The exact opposite will occur when supply is decreased. As