1. Date: March 27, 2014 Topic: Combining supply and demand. Aim: How did supply and demand meet? Do Now: Multiple Choice Questions

2. Laws of Supply and Demand.  The law of demand is centered around…?  The law of supply is centered around …?

3. BALANCE TO THE FORCE!

4. BALANCE

5.  The point of balance between price and quantity.  At Equilibrium, the market for a good is stable.

6. When supply and demand meet in the marketplace, a market price is created. This is equilibrium price. The best way to visualize equilibrium price to place the supply and demand curves in the same diagram.

7.  Equilibrium in a market occurs when the price balances the plans of buyers and sellers.  It sets the value of the product.  Equilibrium price is represented by the point where the demand and supply curves intersect.

8.  When the quantity supplied is not equal to quantity demanded in a market.  The market price of quantity supplied is anywhere but at the equilibrium. THERE IS NO BALANCE!

9.  Quantity demanded is more than the quantity supplied.  The actual price in a market is below the equilibrium price  A low price encourages buyer and discourages sellers.

10.  Quantity supplied exceeds quantity demanded.  If the price is too high, then the market will face a problem of excess supply.

13. Price Ceiling: Maximum price that can be legally charged for a good. (Considered “essential” & become too expensive) Price Floor: Minimum price for a good or service.

14.  Motivated by a desire to help poor households by cutting housing costs.  Reduces quantity/quality of housing.  At a low price, seems inexpensive.  However price ceiling increases quantity demanded but decreases quantity supplied.

15.  Employer can pay a worker for an hour of labor.  Federal government sets a base level for the minimum wage.  If the minimum wage is set above the market equilibrium wage rate, decrease in employment.  Excess supply of labor.

16. SUMMARY: How does supply and demand create balance in the marketplace?