Download Econ 6

Econ 6.1 pgs 124-131 Prices
Combining supply and demand
Equilibrium-When supply and demand is ________________, stable market “moving target”
Quantities supplied and demanded will be equal at only one _________________
The supply curve-where demand and supply intersect______________________________
Disequilibrium when supply and demand is not ___________________
Excess demand low prices raise demand, encourages buyers, discourages sellers
As prices rise, demand slackens until equilibrium
highest price the market will bear-or the demand /supply curve shifts
Excess supply quantity supplied exceeds quantity demanded-high prices lowers demand, surplus supply
Government Intervention
Price ceiling-___________________________________________________________________
“rent control”
Problems-landlords do not maximize profits, can’t cover expenses, little incentive to build/let units
Renters-luck,excess demand
Price Floors ______________________________________________________________________
____________________________________________________________________________
Cigarettes, gasoline)
Raising it could cost jobs
Price supports _________________________________________________________________
_____________________________________________________________________________________
Subsidies-____________________________________________________________________________
Direct=cash payments (cash transfer)
Indirect= tariffs (tax on foreign goods)
6.2 pgs 133-137
Changes in market equilibrium
Shift in supply the entire supply curve will shift, equilibrium will shift with it
Excess supply =lower cost,= higher demand= new _________________________________
Excess demand higher prices, empty shelves, long lines, shortages
Search costs-____________________________________________________________________
_______________________________________________________________________________
Higher prices=lower demand=market equilibrium
6.3 pgs 139-144 The role of prices
Price-almost always the most efficient way to allocate or distribute resources
Helps move- land, labor, and capital into the hands of ______________________________
Helps move goods and services into the hands of ______________________________________
provides standard measure of value (worth)
provides incentive to producers and consumers
Flexibility-when supply or demand shift, price will also
Supply shock-_______________________________________________________________________
_____________________________________________________________________________________
Rationing-complicated and time consuming, organization
Prices-raise them and it will resolve excess demand
Prices are “free”-no government intervention needed
rationing-_____________________________________________________________________________
black market ________________________________________________________________________
-In a “price-driven” economy there is a lot of choices of goods
-efficient resource allocation (land, labor capital-to producers who’s goods are in demand
Market problems
Imperfect competition-too few producers
Spillover costs-externalities
____________________________________________________________________________________
____________________________________________________________________________________
Imperfect information-of both buyer and seller