chapter 6. remind me… what is the market? in the market, demand and supply interact buyers +...
TRANSCRIPT
EquilibriumChapter 6
Seeking Equilibrium: Demand and Supply
The Interaction of Demand and Supply• Remind me… What is the market?
• In the market, demand and supply interact
• Buyers + Sellers market equilibrium
• In market equilibrium there is… equilibrium price
• Let’s visit Karen’s sandwich shop on pg. 164
Demand and Supply Schedule
Demand and Supply Curves
Reaching the Equilibrium Price
• Surplus• QS > QD
• Shortage• QD > QS
Equilibrium Price in Real Life• Remember those factors that make demand and
supply shift all around?
• Yea… About those…
• Disequilibrium – an imbalance between quantity demanded and quantity supplied• The process of finding equilibrium starts over again
Prices as Signals
How the Price System Works• Competitive pricing – producers sell at prices that
balance making highest profit and taking customers away from competitors
• Characteristics of the Price System• It’s neutral
• It’s market driven
• It’s flexible
• It’s efficient
I’m flexible!
Intervention in the Price System
Imposing Price Ceilings• Price ceiling – an established max price that
sellers can charge• Set below the E price; shortage happens
• Ex: football tickets & price ceilings
Setting Price Floors• Price floors – established minimum price buyers
must pay
• Ex: minimum wage as a price floor
• Minimum wage – minimum price an employers must pay for 1 hour of work
Rationing Resources and Products• Rationing – system where gov’t distributes goods
& services using factors other than price• During national emergencies like wartime
• Black market – where G & S are illegally bought & sold• Violates price controls & rationing
Ch. 9 – How are Wages Determined?• Price of labor is wages – payments workers receive in return for their
work
• Equilibrium wage – where # of workers needed = # of workers available
• Different jobs have different wage rates – the rates of pay for specific jobs or work performed
• Wage rate are determined by supply & demand; influence by four factors:• Human capital• Working conditions• Discrimination in the workplace• Glass ceiling
• Government actions• Minimum wage
The End!