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Equilibrium

Equilibrium. Chapter 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

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Equilibrium

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  1. Equilibrium Chapter 6

  2. Seeking Equilibrium: Demand and Supply

  3. 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

  4. Demand and Supply Schedule

  5. Demand and Supply Curves

  6. Reaching the Equilibrium Price • Surplus • QS > QD • Shortage • QD > QS

  7. 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

  8. Prices as Signals

  9. 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!

  10. Intervention in the Price System

  11. 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

  12. 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

  13. 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

  14. 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

  15. The End!

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