Supply & Demand Equilibrium-the point at which quantity demanded and quantity supplied are equal.

Disequilibrium When quantity supplied is not = to quantity demanded.

Supply and Demand Schedule

Excess Demand When quantity demanded is more than quantity supplied

Price Ceiling A maximum price that can legally be charged for a good.

Price Floor A minimum price for a good or service.

Rent Control A price ceiling placed on rent.

Minimum Wage A minimum price an employer can pay a worker

Surplus A situation in which quantity supplied is greater than quantity demanded.

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Change in Demand

The Role of Prices Items will sell more or less depending on price. Items will also sell for different prices depending on quality and style. Check out these examples….

Which shirt costs more and why?

Which store has better quality goods and why?

The Advantages of Prices Incentives Signals Flexibility Price system is “free”

Rationing A system of allocating scarce goods This was a popular practice during WWI and WWII

The Black Market A market in which goods are sold illegally

The Wealth of Nations

Spillover Costs Costs of production that affect people who have no control over how much of a good is produced

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