Equilibrium Review

1. Equilibrium Review Economics Mr. Bordelon

2. Key Terms • The point at which quantity demanded and quantity supplied are equal.

3. Key Terms • The point at which quantity demanded and quantity supplied are equal. • Equilibrium

4. Key Terms • Any situation in which quantity supplied exceeds quantity demanded.

5. Key Terms • Any situation in which quantity supplied exceeds quantity demanded. • Excess supply • Surplus

6. Key Terms • Any situation in which quantity demanded exceeds quantity supplied.

7. Key Terms • Any situation in which quantity demanded exceeds quantity supplied. • Excess demand • Shortage

8. Key Terms • A government-mandated minimum price that must be paid for a good or service.

9. Key Terms • A government-mandated minimum price that must be paid for a good or service. • Price floor

10. Key Terms • A government-mandated maximum price that is allowed to be charged for a good or service.

11. Key Terms • A government-mandated maximum price that is allowed to be charged for a good or service. • Price ceiling

12. Main Ideas • What role does the government play in determining some prices?

13. 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.

14. Main Ideas • What problem can a price floor cause?

15. Main Ideas • What problem can a price floor cause? • Price floors can cause excess supply.

16. Main Ideas • Explain how to interpret the supply and demand graph. • Equilibrium • Demand • Supply • Price and Quantity • Shift of Supply or Demand

17. Main Ideas • Where is equilibrium? How do you know? • Where is a shortage? How do you know? How much is that shortage? • Where is a surplus? How do you know? How much is that surplus?

18. Main Ideas • Where is equilibrium? How do you know? $1.50, Qd = Qs. • Where is a shortage? How do you know? How much is that shortage? $0.50 - $1.00, Qd > Qs, 200 ($0.50) or 100 ($1.00) • Where is a surplus? How do you know? How much is that surplus? $2.00 - $3.00, Qs > Qd, 100 ($2.00), 200 ($2.50), or 300 ($3.00)

19. 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 What happens when these laws are repealed?

20. 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 What happens when these laws are repealed?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 lower-income residents are forced to leave.

21. Random • What kind of goods would governments place price ceilings?

22. Random • What kind of goods would governments place price ceilings? • Essential but generally too expensive.

23. Random • What happens when we have a minimum wage?

24. 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.

25. Random • What happens when the supply of a good is greater than the consumer wants to buy, that is, how do we get rid of the surplus?

26. Random • What happens when the supply of a good is greater than the consumer wants to buy, that is, how do we get rid of the surplus? • Either the good remains unsold or the price drops (the latter more likely).

27. Random • Technology reduces production costs. If demand remains unchanged, what happens to the product sold? (Hint: Supply increases!)

28. 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.

29. How do you calculate the shortage here?

30. How do you calculate the shortage here?