Transcript Equilibrium Review

Equilibrium Review
Economics
Mr. Bordelon
Key Terms
 The point at which quantity demanded and quantity supplied
are equal.
Key Terms
 The point at which quantity demanded and quantity supplied
are equal.
 Equilibrium
Key Terms
 The financial and opportunity costs consumers pay in
searching for a good or service.
Key Terms
 The financial and opportunity costs consumers pay in
searching for a good or service.
 Search costs
Key Terms
 A system of allocating scarce goods and services by criteria
other than price.
Key Terms
 A system of allocating scarce goods and services by criteria
other than price.
 Rationing
Key Terms
 A sudden drop in the supply of a good.
Key Terms
 A sudden drop in the supply of a good.
 Supply shock
Key Terms
 Any situation in which quantity supplied exceeds quantity
demanded.
Key Terms
 Any situation in which quantity supplied exceeds quantity
demanded.
 Excess supply
 Surplus
Key Terms
 Any situation in which quantity demanded exceeds quantity
supplied.
Key Terms
 Any situation in which quantity demanded exceeds quantity
supplied.
 Excess demand
 Shortage
Key Terms
 A government-mandated minimum price that must be paid
for a good or service.
Key Terms
 A government-mandated minimum price that must be paid
for a good or service.
 Price floor
Key Terms
 A government-mandated maximum price that is allowed to
be charged for a good or service.
Key Terms
 A government-mandated maximum price that is allowed to
be charged for a good or service.
 Price ceiling
Main Ideas
 What factors can lead to disequilibrium?
Main Ideas
 What factors can lead to disequilibrium?
 Disequilibrium can be caused by a change in supply or
demand.
Main Ideas
 What role does the government play in determining some
prices?
Main Ideas
 What role does the government play in determining some
prices?
 The government can offer price floors, such as farm subsidies
or minimum wage, and price ceilings, such as rent control.
Main Ideas
 What problem can a price floor cause?
Main Ideas
 What problem can a price floor cause?
 Price floors can cause excess supply.
Main Ideas
 How do prices interact as a “language” in the free market?
 Prices offer buyers and sellers a way to recognize value as
well as signaling changes in supply and demand.
Main Ideas
 Explain how to interpret the supply and demand graph.
Main Ideas
Price of a slice
of pizza
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Qd
300
250
200
150
100
50
Qs
100
150
200
250
300
350
Critical Thinking
 Why have some cities and towns passed rent control laws?
How do these laws affect price equilibrium? What happens
when these laws are repealed?
Critical Thinking
 Why have some cities and towns passed rent control laws?
How do these laws affect price equilibrium? What happens
when these laws are repealed?
 Rent control laws are enacted to control inflation of prices
and assist lower-income groups. The laws cause
disequilibrium, resulting in a shortage. When rent control is
repealed, the prices increase to equilibrium, and lowerincome residents are forced to leave.
Random
 What kind of goods would governments place price ceilings?
Random
 What kind of goods would governments place price ceilings?
 Essential but generally too expensive.
Random
 What happens when we have a minimum wage?
Random
 What happens when we have a minimum wage?
 In theory, businesses would hire fewer workers because they
would have to pay higher than the equilibrium price.
Random
 What happens when the supply of a good is greater than the
consumer wants to buy?
Random
 What happens when the supply of a good is greater than the
consumer wants to buy?
 Either the good remains unsold or the price drops (the latter
more likely).
Random
 What leads to black markets?
Random
 What leads to black markets?
 Rationing
Random
 Technology reduces production costs. If demand remains
unchanged, what happens to the product sold? (Hint:
Supply increases!)
Random
 Technology reduces production costs. If demand remains
unchanged, what happens to the product sold? (Hint:
Supply increases!)
 More goods will be sold at a lower price.