Supply & Demand

 Equilibrium-When demand and supply are equal  Disequilibrium- when supply and demand are not equal  *Market Clearing Price/Quantity = Equilibrium

 Price Ceiling- maximum price that can legally be charged for a good Rent controlled apartments Reduces quantity & quality of the product

 Price Floors- a minimum price that can be paid for a good or service Minimum wage Federal: $7.25, Illinois: $8.25

 Shortage- demand is greater than supply  Surplus- demand is less than supply  Search Costs- Financial & opportunity costs consumers pay when searching for a good

Price of Pizza Quantity Demanded Quantity Supplied Result shortage shortage equilibrium surplus surplus

 Black Market- a market where goods are sold illegally  Adam Smith wrote The Wealth of Nations Profit comes from finding what consumers want, and then providing it.

E1 E2 E3 PRICEPRICE Quantity