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=. Mr. Wyatt. Equilibrium. It is where supply and demand cross The market is stable Only = at one price and at one quantity Disequilibrium occurs when either price or supplied are anywhere but at equilibrium Shortages – counteracted by raising the price and supply more.
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= Mr. Wyatt
Equilibrium It is where supply and demand cross • The market is stable • Only = at one price and at one quantity Disequilibrium occurs when either price or supplied are anywhere but at equilibrium • Shortages – counteracted by raising the price and supply more. • Surplus – counteracted by lowering the price and supplying less.
Interference Price ceilings occur when the govt. interferes with the market and order a maximum price that can be charged for a good/service and are below equilibrium price. • Rent control - Price floors occur when the govt. orders a minimum price that can be charged for a good/service. • Minimum wage - minimum work earnings is set, but is counteracted by loss of jobs. • Agriculture price supports -
New Equilibrium Increase in supply vs. decrease in supply • When you start to have an inventory of goods, prices will fall to increase demand (the supply curve moves right along the demand curve) • Decrease in supply has the exact opposite result Increase in demand vs. decrease in demand • Fad cause an increase in demand, thus a shortage • search costs also appear – (opportunity & financial costs) • The inverse is true
Price In The Market It is the most effect way in to allocate or distribute limited resources. • Costs nothing to administer Price is a common language for both buyers and sellers • Standard measure of value • It communicates whether goods are in short supply. • Firms have the incentive for existing firms to produce more & new firms to enter the market. • They are flexible • Creates shortages (supply shock) that are sudden • Sometimes requires rationing