1. Prices

2. Advantages of Prices
Prices serve as a link between producers and consumers
This helps to answer the WHAT, HOW and FOR WHOM questions
Prices help to make the market Competitive
Prices allow consumers to make decisions about purchases

3. Economic Models
When you combine a market Demand and Supply curve, you get a Market Model
Market Equilibrium – a situation in which the quantity of goods supplied is equal to the quantity demanded
Surplus – When the quantity supplied is more than the quantity demanded
Shortage – Quantity supplied is less than the quantity demanded

4. Graph What does a change in demand look like?
What does a change in supply look like?

5. Price Ceilings
Setting a maximum legal price that can be charged for a product
In New York, the demand for apartments would allow the monthly rent to climb to prices that would exclude the majority of the market. A price ceiling allows the average person to be able to rent an apartment.

6. Ceiling
Price
Quantity Supplied
Quantity Demanded

7. Price Floors
Setting a minimum legal price that can be paid for a good or service
Minimum wage is a price floor, it is the minimum amount that can be paid for the service of an employee

8. Ceiling
Floor
Quantity Demanded
Quantity Supplied

9. Price Supports
In certain markets, Target Prices are set for goods, which is essentially a price floor
In markets like Agriculture, the government tries to set target prices to stabilize the prices for consumers
If the cost of production exceeds the target price, farmers will receive subsidies (money from the government) to make up for losses