Market-Clearing Price Supply and Demand together

When data sets of supply and demand are graphed together, much can be learned about the market for that item.

Market-Clearing Price 1. Market Clearing Price (A.K.A. Equilibrium Price) The point at which supply and demand meet. Technical definition: The price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy.

Shortage 2. Shortage A situation in which the quantity demanded is greater than the quantity supplied at a set price.

Surplus 3. Surplus A situation in which quantity supplied is greater than the quantity demanded at a set price.

*How do you determine each? Turn to the graphs!

Rationing Rationing exists because of scarcity.

Price Controls Decrease the amount of exchange that occurs

Price Ceiling The highest price set by government regulators for a good or service. Limiting prices is often intended to protect consumers.

Price Floor A price floor is a government- or group-imposed limit on how low a price can be charged for a product. For a price floor to be effective, it must be greater than the equilibrium price.