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PRICES Lesson 9
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Balance the Market Equilibrium – where price and quantity are the same
GOOD AND STABLE! QD=QS
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Disequilibrium – any price or quantity not at equilibrium
QD NOT EQUAL TO QS
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Excess Demand Excess demand – quantity demanded is more than quantity supplied Long lines at your pizza joint….raise the prices As long as QD exceeds QS, keep raising the prices
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Excess Supply Excess supply – quantity supplied is higher than quantity demanded Throwing away too much? Sellers don’t want to waste their resources!!!!
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Government control Price Ceiling Price Floor
Max price set by law that sellers can charge for a good or service Ex. Apartment rent Min price set by law that must be paid for a good or service Ex. Minimum wage
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Changes in Equilibrium
REMEMBER ALL THE CHANGES?
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As technology gets better, prices fall.
Early CD Players 1980s…..$1,000 As technology gets better, prices fall.
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Surplus – quantity supplied exceeds quantity demanded (excess supply)
How do you respond?
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Shortage – quantity demanded is greater than quantity supplied
How do producers respond?
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