Combining Supply and Demand Chapter 6 Section 1

Demand & Supply schedules can be combined to show the demand & supply for a good at different prices.

Equilibrium- the point of balance between price and quantity Equilibrium- the point of balance between price and quantity. The market is stable & quantity supplied equals quantity demanded.

Disequilibrium occurs when supply does not equal demand in a market.

Excess Demand occurs when quantity demanded is more than quantity supplied.

Excess Demand leads to higher prices until the market reaches equilibrium.

Excess Supply occurs when quantity supplied exceeds quantity demanded.

Excess Supply leads sellers to save their resources and make less goods until the market reaches equilibrium.

Price Ceiling- maximum price that can be legally charged for a good or service.

Price ceilings increase the quantity demanded but decreases the quantity supplied.

Example: Rent control in New York sets low rent for some apartments.

Price Floor- minimum price, set by the government, that must be paid for a good or service.

Example: minimum wage which sets a minimum price that an employer can set for an hour of work.

Be sure that you look at the charts and graphs on pages 126, 127, 129, & 131.