1. Supply and Demand Equilibrium Adapted from material provided by Hudson Falls High School

2. Examples: Change in Demand What is the initial Price Equilibrium? What is the New Price Equilibrium? What factors (determinants) may have caused this shift?

3. Example: Change in Supply What is the initial Equilibrium Price/Quantity? What is the New Equilibrium Price/Quantity? Why would the Government get offer subsidies to Universities?

4. When the quantity supplied exceeds the quantity demanded What is the amount of surplus at $40?

5. When there is an excess of quantity demanded compared to quantity supplied What is the amount of shortage?

6. Thus, a surplus creates downward pressure on the price, and a shortage creates upward pressure on the price Price tends toward Equilibrium

7. Price Floors & Price Ceilings When the Government Gets Involved

8. Price Ceilings A legal maximum that can be charged for a good Results in a Shortage Ex. – rent controls, credit card interest rates, oil

9. Price Floors A legal minimum that can be charged for a good. Results in a Surplus Ex. minimum wage, milk, sugar