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PRICE Equilibrium: the point where demand and supply come together at the same price and quantity At this point the needs of both consumers and producers.

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Presentation on theme: "PRICE Equilibrium: the point where demand and supply come together at the same price and quantity At this point the needs of both consumers and producers."— Presentation transcript:

1 PRICE Equilibrium: the point where demand and supply come together at the same price and quantity At this point the needs of both consumers and producers are in balance

2 DISEQUILIBRIUM Disequilibrium: when the quantity supplied and quantity demanded are not equal at the price offered. One of two results will occur: 1. Excess demand (Shortage) 2. Excess supply (Surplus)

3 EXCESS DEMAND Excess demand occurs when quantity demanded is greater than quantity supplied This happens when the price of a good is below the equilibrium price Producers will respond to this shortage by increasing the price of the good

4 EXCESS SUPPLY Excess supply occurs when quantity supplied is greater than quantity demanded This happens when the price of a good is above the equilibrium price Producers will respond to this surplus by decreasing the price of the good

5 PRICE CEILINGS A maximum price set by law is a price ceiling Price ceilings are placed on some essential goods that some consumers wouldnt otherwise be able to afford Rent control is an example of a price ceiling Zombies will attack oct

6 PRICE CEILINGS Price ceilings are set below the market equilibrium price; therefore they result in excess demand Price ceilings = shortage (it is difficult to find an apartment in a city with rent control)

7 PRICE FLOORS A minimum price set by law is a price floor Price floors are used to ensure that prices dont fall so low a producer wont get adequate reward for his/her efforts Minimum wage is an example of a price floor

8 PRICE FLOOR Price floors are set above the market equilibrium price; therefore they result in excess supply Price floors = surplus (there will be fewer jobs for the # of workers available)

9 CHANGES IN MARKET EQUILIBRIUM - SUPPLY If supply increases, the new equilibrium price will be _________ and the new equilibrium quantity will be _________ Lower, higher

10 CHANGES IN MARKET EQUILIBRIUM - SUPPLY If supply decreases, the new equilibrium price will be _________ and the new equilibrium quantity will be __________ higher, lower

11 CHANGES IN MARKET EQUILIBRIUM - DEMAND If demand increases, the new equilibrium price will be ________ and the new equilibrium quantity will be ________ higher, higher

12 CHANGES IN MARKET EQUILIBRIUM - DEMAND If demand decreases, the new equilibrium price will be _________ and the new equilibrium quantity will be ________ lower, lower


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