Transcript price ceiling

Take out
spiral
What will we learn today?
12.2.5 Understand the process by which competition among buyers and sellers
determines a market price.
12.2.6 Describe the effect of price controls on buyers and sellers.
Directions:Bellwork, answer the following question.
You need to write a one paragraph response. There
should be no talking during the Bellwork.
Unit: Prices
Watch this clip from The
Hudsucker Proxy
(1:03:00).
Describe what you saw
using at least three econ
terms.
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Assignment :
6.1 Combining Supply and
Demand Notes
We’ve learned about supply and demand. Now, let’s put the concepts
together!
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I. Balancing the Market
 Equilibrium: the point at which quantity
demanded and quantity supplied are equal or
$When the buyer will purchase exactly as much as sellers are willing to sell
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II. Disequilibrium
 Disequilibrium: any price or quantity not at equilibrium
 Excess demand: when quantity demanded is more
than quantity supplied
example: when something sells out quickly (like digital
cameras on Black Friday), there is excess demand.
 Excess supply: when the quantity supplied is more than
the quantity demanded. $A market in equilibrium that
gets an increase in supply will experience quantity
supplied exceeding quantity demanded, so the price
will drop. example: Shoe City sold Nike at the equilibrium
price of $50, Shoe Town moves in next door and also sells at
$50. Now there is too much Supply, so the Price must drop
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III. Government Intervention
Sometimes government can create a price ceiling, or a
maximum price that can be legally charged for a good or
service. $ Price ceilings are used on goods that are
essential but to expensive for some consumers.
$One example is rent control, a price ceiling placed on
rent. In New York City, rent was being raised like crazy, so
the government started rent control to keep the prices from
getting out of control.
Is rent control a
good thing or a
bad thing?
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Bad parts of rent control:
 Rent control makes apartments so cheap that
there is excess demand. They don’t have
enough apartments to met demand.
 Rent control reduces the quality of housing
(more slums).
 Landlords know they can’t make much
money, so they don’t take care of the
maintenance.
 Because many apartment buildings aren’t
making money, they get converted to offices.
 Economists argue that rent controls do
more bad than good.
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IV. Price Floors
 Price floor: a minimum price for a good or service
example: $ minimum wage, a minimum price that
an employer can pay a worker for an hour of
labor.
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Assignment :
pg. 131, 1 - 7
C4U = checking for understanding
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1. What is unique about
equilibrium price?
 C4U
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1. What is unique about
equilibrium price?
 Equilibrium price is unique because it is the point
where price and amount supplied are equal.
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2. What situation can lead to
excess demand?
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2. What situation can lead to
excess demand?
 When quantity demanded is higher than quantity
supplied. This can happen at Christmas when there
are Black Friday sales.
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3. How is a price floor different
from a price ceiling?
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3. How is a price floor different
from a price ceiling?
 A price floor is a gov. set minimum price for certain
goods or services (like minimum wage). A price ceiling
is a gov. set maximum for goods and services (like rent
control).
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4. How does rent control work?
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4. How does rent control work?
 Gov. places a max price on rent so that poor families
can afford to live in the city.
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5. pg. 536
Minimum wage goes up to $600 per week. What
category of jobs is unaffected by an increase in
minimum wage? What two categories are most
affected? What will happen?
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5. pg. 536
Minimum wage goes up to $600 per week. What
category of jobs is unaffected by an increase in
minimum wage? What two categories are most
affected? What will happen?  A. Least affected:
management and
professional
 B. Most affected: service,
transportation
 C. Wages will increase,
some workers will lose
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jobs.
6. What are the benefits and
drawbacks of a price ceiling?
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6. What are the benefits and
drawbacks of a price ceiling?
 Poor people can afford things, but supply and quality
decreases.
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Label: price floor, supply curve,
equilibrium point, disequilibrium point,
demand curve, price ceiling
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Label: price floor, supply curve,
equilibrium point, disequilibrium point,
demand curve, price ceiling
A. Equilibrium
B.
C.
D.
E.
F.
point
Disequilibrium
point
Supply curve
Price floor
Price ceiling
Demand curve
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6.3 The Role of Prices
 Prices in a free-market serve a vital role.
Prices help move land, labor, and capitol
into the hands of producers and buyers.
 $ Prices lead to an efficient allocation of
resources. Resources are used in the most
valuable and productive way according to the
needs of consumers and producers.
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Assignment : Homework
Ch. 6 Phocabulary-In Spiral
 Spillover costs (pg. 144)
 Black market (pg. 142)
 Rationing (pg. 141)
 Supply shock (pg. 141)
Word and definition
on the right.
Picture on the
left.
 Search costs (pg. 136)
 Minimum wage (pg. 130)
 Rent control (pg. 129)
 Excess supply (pg. 128)
 Excess demand (pg. 126)
 Equilibrium point (pg. 125)
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Assignments :
 Page 146 Questions 1-7-In Spiral-IN
COMPLETE SENTENCES
 Phocabulary CH 6= page 146 all KEY
TERMS-IN Spiral
 Do Chapters 4 & 5 Crossword
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