Download Combining Supply & Demand

Combining Supply &
Demand
6.1
Delaney Felix
Poe - 5
Balancing the market

Demand is how much someone is willing
to pay for an item
Supply is how much producers are willing
to sell
 The two of these should bring the market
to a good balance, called equilibrium

Equilibrium

* Equilibrium – the point of balance
between price and quantity

At equilibrium, the market for a product
should be stable
Disequilibrium
* Disequilibrium is when the market is
at any state except equilibrium.
 REAL LIFE
- During the holidays there is always an “it”
item to have. Usually these run out
because every single family wants one.
This is an example of disequilibrium

Excess Demand
* Excess demand - When quantity
demanded is more than the quantity that
is supplied
 As long as this happens, supplies will
continue to raise the price

Excess Supply
* Excess supply - When quantity
supplied exceeds what is demanded.
 When there is excess supply, prices tend
to lower continuously.

What else could we
expect to pay less than fifty cents for?

Government Intervention
* Price ceiling – the maximum price
that can legally be put on a product.
 * Price floor – the minimum price that
must be charged for an item.
 http://youtu.be/Ffcd6Wdkn5w

Rent Control
REAL LIFE
 * Rent control – an experiment on putting price
ceilings on apartments. Rent control reduces quality and
quantity of apartments, which ended up hurting the poor
people that they were trying to help.
 Landlords used to be able to keep the defects of an
apartment away from a possible tenant until after they
moved in, and once the tenant noticed them the landlord
was allowed to threaten to raise the price of their lease.
Rent control ended this, letting tenants ask about
defects without fearing the rent increases.

Quiz
Which of the key terms ended up helping
future tenants?
 T/F Disequilibrium is when everything is in
a good balance?
 T/F Excess demand cause prices to fall?
 T/F Price floor is the most you can charge
for a product?
 T/F Supply is how much people need of a
product?
