1. How supply and demand create balance in the marketplace
Prices
How supply and demand create balance in the marketplace

2. Vocabulary Price Surplus Shortage Market equilibrium Excess demand
Excess supply
Price floor
Price ceiling
Adam Smith
John Keynes
Karl Marx

3. Did you know?
In the oil crisis of the 1970’s people argued about how the gas rationing should be allocated. Should fuel efficient vehicles receive fewer coupons then gas-guzzling models? Should western states receive more because they travel longer distances than Eastern states? What about families sharing one car?

4. Price Rationing
Price rationing is the process by which the market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied.

5. Price Rationing
A decrease in supply creates a shortage at P0. Quantity demanded is greater than quantity supplied. Price will begin to rise.
D > S = Shortage

6. Alternative Rationing Mechanisms
A black market is a market in which illegal trading takes place at market-determined prices.

7. Chapter 6.2 The Price System A Work

8. Equilibrium and Disequilibrium
Equilibrium- the point at which quantity demanded and quantity supplied are equal.
Disequilibrium- describes any price or quantity not at equilibrium

9. Around “m.e.” Shortage- quantity demanded exceeds quantity supplied
Surplus-quantity supplied exceeds quantity demanded

10. Review 1. What is total revenue?
The amount a company receives for selling goods and services
2. What is a shortage?
Demand > Supply
3. What is market equilibrium?
The point in which market demand equals market supply