Download Chapter 6 - Hicksville Public Schools

Economics 12R
Mr. Trenkle
Chapter 6 Review
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Equilibrium: Quantity Demanded = Quantity Supplied
Disequilibrium-
a. excess supply- surplus- happens when price is set too
high. Creates downward pressure on price.
b. excess demand- shortage- happens when price is set
too low. Creates upward pressure on price.
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Price ceiling- legal maximum price. Example is rent control.
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Price floor- legal minimum price. Example is minimum wage.
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Equilibrium can change when one of the determinants of Demand or Supply
changes. Draw all 4 sets of curves on back.
Price system can sometimes be harsh on those who can’t afford the item.
Communism uses a command economy rather than a price system to allocate
goods and services.
Rationing is a method used instead of price system at certain times in US
history. ( ex. WW II)- this keeps the price on necessary goods from rising too
high.
If there is a sudden shortage or surplus of a good – Supply shock.
Inefficiency in markets- Market Failure. Can happen when:
o Consumer does not have enough information
o Spillover costs – cost that affects people who have no control over the
product
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