Economics - 8th - Chapter 6 - Section 1 - Combining Supply and Demand

Why do rental properties that are under rent control become run down?

1. It limits the landlords' profits 2. landlords will try to increase income by cutting costs 3. landlord has no incentive to make the apartment more attractive because there are lots of people who want that apartment 4. renters will have to wait a longer period of time to get problems fixed

What is the price ceiling?

A maximum price that can be legally charged for a good or service

What is the price floor?

A minimum price for a good or service

What is minimum wage?

A minimum price that an employer can pay a worker for an hour of labor

What is rent control?

A price ceiling placed on rent

Do free markets need government intervention?

Absolutely not! They produce their best outcomes when they are left alone

What is the outcome of a price ceiling?

An increase in demand will occur and create excess demand Many people will have to go without

When market is in disequilibrium, what happens to get it back in equilibrium?

As long as prices are flexible, market forces will push the market toward equilibrium

What happens when price drops for a certain good?

As price falls, the quantity demanded will rise. Customers will buy more Suppliers will produce less

When is the market considered stable?

At equilibrium

How does a government intervene in the market?

By imposing either a price ceiling or a price floor

What would the consumers' reaction be if a seller raises the price of a product?

Consumers will buy less of the product

What happens when customers want more of a product that sellers are willing to sell?

Customers will wait at long lines and some will have to go without

What is disequilibrium?

Describes any price or quantity not at equilibrium. When the quantity supplied is not equal to the quantity demanded in a market.

Is competition a good thing or bad thing in free markets?

Good thing

What type of products can the government impose price ceilings on?

Goods that are considered essential

What are the outcomes of disequilibrium?

It can cause excess demand or excess supply

If we compare the demand schedule and supply schedule, what will be learn?

It will show us to find the common ground for the two sides of the market. For each price, it lists the amount sellers are willing to make and consumers are willing to buy

Are central planning markets more or less successful than free markets?

LESS successful

What are central planning markets?

Markets such as communism and socialism

What is a well-known price floor?

Minimum age

Can different equilibrium prices exist?

No, it is represented by only one price

What do demand schedules show?

Shows how much consumers are willing to buy at various prices

What do supply schedules show?

Shows how much sellers are willing to sell at various prices.

What is "equilibrium"?

The point where demand and supply come together. The point at which quantity demanded and quantity supplied are equal.

What is an example of where a price ceiling was imposed?

The rent control set by New York City on rental properties to prevent inflation during the housing crisis of 1940

What happens when the minimum wage is set higher than equilibrium?

The supply of workers increases but the demand decreases

What will a seller do is they see that the demand for the product is higher than what they are willing to make?

They may raise the price

What will suppliers do to address excess supply?

They will lower the price because they won't want to throw out products that they made and was not bought

How can equilibrium be graphed?

Use a supply and demand graph Where supply and demand are equal, equilibrium is found

What is excess demand?

When quantity demanded is more than quantity supplied

What is excess supply?

When quantity supplied is more than quantity demanded

When does excess demand occur?

When the actual price in a market is below the equilibrium price. Lower price encourages buyers and discourages sellers

How does the market system work?

consumers buy the products they want sellers make enough profit to stay in business Sellers respond to changing needs and tastes of consumers

How can you find the equilibrium price?

look for the price at which the quantity supplied equals the quantity demanded

What would happen if rent controls were lifted?

rent will rise to the market equilibrium people would have an easier time to find an apartment People who had an apartment where rent was controlled could lose their homes Benefits of ending rent control exceed the costs

How can excess supply occur?

suppliers are encouraged to supply the amount of products at a certain price, but discourages customers from buying them

When are price floors imposed by government?

when the governments wants sellers to receive some minimum reward for their efforts