 Economics Mr. Bordelon

 The point at which quantity demanded and quantity supplied are equal.

o Equilibrium

 Any situation in which quantity supplied exceeds quantity demanded.

o Excess supply o Surplus

 Any situation in which quantity demanded exceeds quantity supplied.

o Excess demand o Shortage

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

o Price floor

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

o Price ceiling

 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.

 What problem can a price floor cause?

 Price floors can cause excess supply.

 Explain how to interpret the supply and demand graph. o Equilibrium o Demand o Supply o Price and Quantity o Shift of Supply or Demand

Price of a slice of pizza QdQs $ $ $ $ $ $  Where is equilibrium? How do you know?  Where is a shortage? How do you know? How much is that shortage?  Where is a surplus? How do you know? How much is that surplus?

Price of a slice of pizza QdQs $ $ $ $ $ $  Where is equilibrium? How do you know? $1.50, Qd = Qs.  Where is a shortage? How do you know? How much is that shortage? $ $1.00, Qd > Qs, 200 ($0.50) or 100 ($1.00)  Where is a surplus? How do you know? How much is that surplus? $ $3.00, Qs > Qd, 100 ($2.00), 200 ($2.50), or 300 ($3.00)

 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 What happens when these laws are repealed?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 When rent control is repealed, the prices increase to equilibrium, and lower-income residents are forced to leave.

 What kind of goods would governments place price ceilings?

 Essential but generally too expensive.

 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.

 What happens when the supply of a good is greater than the consumer wants to buy, that is, how do we get rid of the surplus?

 Either the good remains unsold or the price drops (the latter more likely).

 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.

 How do you calculate the shortage here?