1. Supply & Demand

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

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

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

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

6. Price of Pizza Quantity Demanded Quantity Supplied Result.50300100shortage 1.00250150shortage 1.50200 equilibrium 2.00150250surplus 2.50100300surplus

7. 3.00 2.50 2.00 1.50 1.00.50 0 100150 200250300

8.  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.

9. 3.00 2.50 2.00 1.50 1.00.50 0 100150200250300 E1 E2 E3 PRICEPRICE Quantity