January 19, 2017

Equilibrium 

Equilibrium: The point in which the supply curve intersects with the demand curve.

Excess Demand: Occurs when quantity demanded is greater than quantity supplied. This will result in a shortage.

• Shortage: Consumers cannot get the quantities of the items they need
• Created by Price Ceiling
• Price Ceiling: When the Government puts a legal limit on how high the price of a product can be
• *Example: Rent Control

Excess Supply: Occurs when quantity supplied is greater than quantity demanded. This will result in a surplus.

• Surplus: Producers have inventories that they cannot get rid of
• Created by Price Floor
• Price Floor: The lowest legal price a commodity can be sold at.
• Government uses this to prevent prices from becoming to low
• *Example: Minimum Wage