Transcript Price ceiling

The Price System at Work
1-What are economic models used for?
To analyze behavior and predict outcomes
2-What is the equilibrium price?
When the supply and demand curves intersect:
the price at which the number of units produced
equals the number of units sold. There is
neither a surplus nor a shortage of the product
in the market.
https://www.youtube.com/watch?v=7eZcPs
9z9OA
3-What is a surplus?
When the quantity
supplied is larger than
the quantity
demanded, the
difference between
them is called excess
supply.
This creates a
SURPLUS.
4-What can we assume about price based on
the size of a surplus?
It will go down.
5-What is a Shortage?
When the quantity
demanded is larger
than the quantity
supplied, the
difference between
them is called excess
demand.
This creates a
SHORTAGE.
6-What will happen to the price and quantity supplied
in the next trading period as a result of a shortage?
Both will go up.
7-What tends to happen to the market once the
equilibrium price has been reached?
The market will clears, by leaving neither a
shortage nor a surplus
Price ceiling [keeps prices lower]
A maximum legal price that can be charged for a
product.
Could lead to a shortage/Rent control
Price floor [keeps prices higher]
The lowest legal price that can be paid for a
good or service
Minimum wage
PRICE CEILINGS
A price ceiling is a government- imposed limit on the
highest price firms can charge in a market. A price
ceiling will cause a SHORTAGE.
https://www.youtube.com/watch?v=R0h8kfA4i_A&index=9&list=PL-JlTsnpBVIESkJLqQ_SPfuQ_rIh3ttDR
PRICE FLOORS
A price floor is a government- imposed limit below which
prices cannot fall. Price floors tend to cause a SURPLUS.
Example- milk, minimum wage