e. napp combining supply and demand in this lesson, students will be able to identify factors which...
TRANSCRIPT
E. Napp
Combining Supply and Demand
In this lesson, students will be able to identify factors which lead to equilibrium or disequilibrium in a market. Students will be able to identify and/or define the following terms:
EquilibriumDisequilibrium
Excess DemandExcess SupplyPrice CeilingPrice Floor
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Do you notice the point where supplyand demand intersect?
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Equilibrium
• When creating a demand curve and a supply curve, there is a point where the curves intersect. This point is the equilibrium point.
• Equilibrium occurs when the quantity demanded equals the quantity supplied.
• A market is stable at equilibrium.
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If a seller has seven donuts on the shelfat $1 per donut, and consumers only wantseven donuts at that price, then the market
is at equilibrium.
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Disequilibrium
• A market is at disequilibrium when the quantity demanded does not equal the quantity supplied.
• If quantity demanded is greater than quantity supplied, excess demand occurs.
• If quantity supplied is greater than quantity demanded, excess supply occurs.
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Low prices encourage consumers. Lowprices can create excess demand.
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Excess Demand
• Excess demand occurs when the actual price is lower than the equilibrium price.
• Low prices encourage demand.
• To fix this problem, prices must be raised.
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If every parent wants to purchase this toyfor the holidays, excess demand can occur.
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However, if no one is buying, then excess supply occurs.
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Excess Supply
• Excess supply occurs when quantity supplied is greater than quantity demanded.
• The actual price is higher than the equilibrium price.
• To fix this problem, prices must be lowered.
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The day after Valentine’s Day, consumerswill not pay high prices for Valentine’s
candy.
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Price Ceiling• A price ceiling is the maximum price that
can be legally charged for a good or service.
• The government interferes with market equilibrium when it creates a price ceiling.
• Rent control is an example of a price ceiling.
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Rent control is an example of a priceceiling.
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Price Floor
• A price floor is the minimum price that can be legally charged for a good or service.
• The government interferes with market equilibrium when it creates a price floor.
• Minimum wage is an example of a price floor.
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The minimum wage is an example ofa price floor.
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Questions for Reflection:
• When does equilibrium occur in a market?
• Why does excess demand create disequilibrium in the market?
• Define excess supply.
• Why does the government place a price ceiling on rent?
• How does rent control help some but hurt others?
• Provide an example of a price floor.