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Chapter 6: Prices Section 1
Copyright © Pearson Education, Inc.Slide 2 Chapter 6, Section 1 Objectives 1.Explain how supply and demand create equilibrium in the marketplace. 2.Describe what happens to prices when equilibrium is disturbed. 3.Identify two ways that the government intervenes in markets to control prices. 4.Analyze the impact of price ceilings and price floors on a free market.
Copyright © Pearson Education, Inc.Slide 3 Chapter 6, Section 1 What is Equilibrium?
Copyright © Pearson Education, Inc.Slide 4 Chapter 6, Section 1 Equilibrium In order to find the equilibrium price and quantity, you can use supply and demand schedules.
Copyright © Pearson Education, Inc.Slide 5 Chapter 6, Section 1 Disequilibrium –Disequilibrium can produce two possible outcomes: Shortage A shortage causes prices to rise as the demand for a good is greater than the supply of that good. Surplus A surplus causes a drop in prices as the supply for a good is greater than the demand for that good.
Copyright © Pearson Education, Inc.Slide 6 Chapter 6, Section 1 Shortage and Surplus Shortage and surplus both lead to a market with fewer sales than at equilibrium.
Copyright © Pearson Education, Inc.Slide 7 Chapter 6, Section 1 Price Ceiling Price ceilings are one way the government controls prices. –Rent Control Sets a price ceiling on apartment rent Helps the poor cut their housing costs Can lead to poorly managed buildings because landlords cannot afford the upkeep.
Copyright © Pearson Education, Inc.Slide 8 Chapter 6, Section 1 The Effects of Rent Control
Copyright © Pearson Education, Inc.Slide 9 Chapter 6, Section 1 Price Floors A price floor is a minimum price set by the government. The minimum wage is an example of a price floor. Minimum wage affects the demand and the supply of workers.
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Ceilings and Floors. The Role of Prices Convey information –When Tickle Me Elmos went up in price form about $30 to $300, it told us something about the.
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