Download Equilibrium - mrsbradleysclass

What is the Right Price?
MRS. BRADLEY
NEWARK HIGH SCHOOL
--SOME SLIDES COURTESY OF JUSTIN
MILLER
A tale of two curves
Demand Curve
Supply Curve
How do Supply and Demand interact?
 The intersection of supply and demand is very
important
Equilibrium
 Equilibrium Price – the price that both buyers and
sellers will accept
 It’s the point where the supply curve and the demand
curve intersect.
 So EQUILIBRIUM is the point at which demand for
a product or service is equal to the supply of the
product or service.
But what if suppliers want to raise the price above
equilbrium?
 When supply is greater than demand, a surplus of
goods/services occurs
 Meaning there is more product available than is
being consumed
What if consumers want more than is being
produced
 When demand is greater than supply, a shortage of
goods/services will occur
 Meaning there is not enough product to meet
consumer demand
Disequilibrium
Any price or quantity not at
equilibrium
When the quantity supplied is
NOT equal to quantity
demanded.
Shortage
 A situation in which buyers want more of a good or
service than sellers are willing to make available at a
particular price.
Can you think of an example?
Surplus
When quantity supplied is more
than quantity demanded.
Sellers have extra goods.
They don’t like this --- especially
if the goods are perishable.
Shortage or Surplus?
 A very popular singer is coming to a town to perform
a concert in a concert hall that seats 10,000 people.
The ticket price for the concert is $30.00 per person.
There are 30,000 fans in the area who are willing to
pay $80.00 per seat to listen to the concert. What
will happen?
When the government steps in…
 Price ceiling: a maximum price that can legally be
charged for a good and a service.
 Price floor: the lowest price allowed for a good or a
service.
Two exampleS
 Rent control: a price ceiling placed
on rent
 Minimum wage: the minimum
price that an employer must pay a
worker for an hour of labor.
Another way….
 … that government influences prices.
 Often given to farmers to keep crop prices high.