EconomicsMr. Bordelon

Equilibrium Review

Key TermsThe point at which quantity demanded and

quantity supplied are equal.

Key TermsThe point at which quantity demanded and

quantity supplied are equal.Equilibrium

Key TermsThe financial and opportunity costs

consumers pay in searching for a good or service.

Key TermsThe financial and opportunity costs

consumers pay in searching for a good or service.Search costs

Key TermsA system of allocating scarce goods and

services by criteria other than price.

Key TermsA system of allocating scarce goods and

services by criteria other than price.Rationing

Key TermsA sudden drop in the supply of a good.

Key TermsA sudden drop in the supply of a good.

Supply shock

Key TermsAny situation in which quantity supplied

exceeds quantity demanded.

Key TermsAny situation in which quantity supplied

exceeds quantity demanded.Excess supplySurplus

Key TermsAny situation in which quantity demanded

exceeds quantity supplied.

Key TermsAny situation in which quantity demanded

exceeds quantity supplied.Excess demandShortage

Key TermsA government-mandated minimum price

that must be paid for a good or service.

Key TermsA government-mandated minimum price

that must be paid for a good or service.Price floor

Key TermsA government-mandated maximum price

that is allowed to be charged for a good or service.

Key TermsA government-mandated maximum price

that is allowed to be charged for a good or service.Price ceiling

Main IdeasWhat factors can lead to disequilibrium?

Main IdeasWhat factors can lead to disequilibrium?Disequilibrium can be caused by a change

in supply or demand.

Main IdeasWhat role does the government play in

determining some prices?

Main IdeasWhat 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 IdeasWhat problem can a price floor cause?

Main IdeasWhat problem can a price floor cause?Price floors can cause excess supply.

Main IdeasHow 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 IdeasExplain how to interpret the supply and

demand graph.

Main IdeasPrice of a slice of pizza

Qd Qs

$0.50 300 100

$1.00 250 150

$1.50 200 200

$2.00 150 250

$2.50 100 300

$3.00 50 350

Critical ThinkingWhy have some cities and towns passed

rent control laws? How do these laws affect price equilibrium? What happens when these laws are repealed?

Critical ThinkingWhy 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.

RandomWhat kind of goods would governments

place price ceilings?

RandomWhat kind of goods would governments

place price ceilings?Essential but generally too expensive.

RandomWhat happens when we have a minimum

wage?

RandomWhat 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.

RandomWhat happens when the supply of a good is

greater than the consumer wants to buy?

RandomWhat 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).

RandomWhat leads to black markets?

RandomWhat leads to black markets?Rationing

RandomTechnology reduces production costs. If

demand remains unchanged, what happens to the product sold? (Hint: Supply increases!)

RandomTechnology 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.