Equilibrium Review Economics Mr. Bordelon

Key Terms The point at which quantity demanded and quantity supplied are equal.

Key Terms The point at which quantity demanded and quantity supplied are equal. Equilibrium

Key Terms The financial and opportunity costs consumers pay in searching for a good or service.

Key Terms The financial and opportunity costs consumers pay in searching for a good or service. Search costs

Key Terms A system of allocating scarce goods and services by criteria other than price.

Key Terms A system of allocating scarce goods and services by criteria other than price. Rationing

Key Terms A sudden drop in the supply of a good.

Key Terms A sudden drop in the supply of a good. Supply shock

Key Terms Any situation in which quantity supplied exceeds quantity demanded.

Key Terms Any situation in which quantity supplied exceeds quantity demanded. Excess supply Surplus

Key Terms Any situation in which quantity demanded exceeds quantity supplied.

Key Terms Any situation in which quantity demanded exceeds quantity supplied. Excess demand Shortage

Key Terms A government-mandated minimum price that must be paid for a good or service.

Key Terms A government-mandated minimum price that must be paid for a good or service. Price floor

Key Terms A government-mandated maximum price that is allowed to be charged for a good or service.

Key Terms A government-mandated maximum price that is allowed to be charged for a good or service. Price ceiling

Main Ideas What factors can lead to disequilibrium?

Main Ideas What factors can lead to disequilibrium? Disequilibrium can be caused by a change in supply or demand.

Main Ideas What role does the government play in determining some prices?

Main Ideas What role does the government play in determining some prices? The government can offer price floors, such as farm subsidies or minimum wage, and price ceilings, such as rent control.

Main Ideas What problem can a price floor cause?

Main Ideas What problem can a price floor cause? Price floors can cause excess supply.

Main Ideas How do prices interact as a “language” in the free market? Prices offer buyers and sellers a way to recognize value as well as signaling changes in supply and demand.

Main Ideas Explain how to interpret the supply and demand graph.

Price of a slice of pizza Main Ideas Price of a slice of pizza Qd Qs $0.50 300 100 $1.00 250 150 $1.50 200 $2.00 $2.50 $3.00 50 350

Critical Thinking Why have some cities and towns passed rent control laws? How do these laws affect price equilibrium? What happens when these laws are repealed?

Critical Thinking Why have some cities and towns passed rent control laws? How do these laws affect price equilibrium? What happens when these laws are repealed? Rent control laws are enacted to control inflation of prices and assist lower-income groups. The laws cause disequilibrium, resulting in a shortage. When rent control is repealed, the prices increase to equilibrium, and lower- income residents are forced to leave.

Random What kind of goods would governments place price ceilings?

Random What kind of goods would governments place price ceilings? Essential but generally too expensive.

Random What happens when we have a minimum wage?

Random What happens when we have a minimum wage? In theory, businesses would hire fewer workers because they would have to pay higher than the equilibrium price.

Random What happens when the supply of a good is greater than the consumer wants to buy?

Random What happens when the supply of a good is greater than the consumer wants to buy? Either the good remains unsold or the price drops (the latter more likely).

Random What leads to black markets?

Random What leads to black markets? Rationing

Random Technology reduces production costs. If demand remains unchanged, what happens to the product sold? (Hint: Supply increases!)

Random Technology reduces production costs. If demand remains unchanged, what happens to the product sold? (Hint: Supply increases!) More goods will be sold at a lower price.