Combining Supply and Combining Supply and DemandDemand

Finding EquilibriumFinding Equilibrium

Balancing a MarketBalancing a Market

Equilibrium: the point at which quantity Equilibrium: the point at which quantity demanded and quantity supplied are equal.demanded and quantity supplied are equal.

Combined Supply and Demand schedules Combined Supply and Demand schedules allow us to see where quantity supplied equals allow us to see where quantity supplied equals the quantity demanded. the quantity demanded.

Equilibrium can be seen on a graph when we Equilibrium can be seen on a graph when we plot Supply and Demand and look at where plot Supply and Demand and look at where they meet. they meet.

DisequilibriumDisequilibrium

Occurs when quantity supplied is not equal to Occurs when quantity supplied is not equal to quantity demanded.quantity demanded.

Excess demand: occurs when quantity Excess demand: occurs when quantity demanded is more than quantity supplied.demanded is more than quantity supplied.

Excess supply: occurs when quantity supplied Excess supply: occurs when quantity supplied is more than quantity demanded.is more than quantity demanded.

The Government.. Again!The Government.. Again!

Price Ceiling: a maximum price that can be Price Ceiling: a maximum price that can be legally charged for a good.legally charged for a good. Rent Control: created to prevent inflation in the Rent Control: created to prevent inflation in the

1940’s and still can be seen today. Section 8 1940’s and still can be seen today. Section 8 Housing. Housing.

A price ceiling increases the quantity demanded A price ceiling increases the quantity demanded but decreases the quantity supplied. Since rents are but decreases the quantity supplied. Since rents are not allowed to rise, this excess demand will last as not allowed to rise, this excess demand will last as long as the price ceiling holds. long as the price ceiling holds.

Price FloorPrice Floor

Price Floor: a minimum price that can be charged for Price Floor: a minimum price that can be charged for a good or service. a good or service. Minimum wage: a minimum price that an employer can Minimum wage: a minimum price that an employer can

pay a worker for an hour of labor; set by government.pay a worker for an hour of labor; set by government. A person working full time and getting paid minimum A person working full time and getting paid minimum

wage is making less than the federal government says is wage is making less than the federal government says is necessary to support a couple and one child.necessary to support a couple and one child.

If minimum wage is set above equilibrium the result is a If minimum wage is set above equilibrium the result is a decrease in employment. There are more people who want decrease in employment. There are more people who want jobs and not enough jobs out there. jobs and not enough jobs out there.