Equilibrium Notes
What is Equilibrium?
- It is a point at which the supply curve intersect with demand curve?
- (When demand & supply meet = Equilibrium)
What is Excess Demand?
- It is when Quantity demanded is greater than Quantity supplied -> Results in shortage
- consumers can not get quantity of items they want
- QD>QS
What is the price ceiling?
- It creates shortage
- It is when government puts legal limit on how high the price of a product can be.
- Ex: gov. sets price ceiling on flu shots & rent control
What is Excess supply?
- It is when quantity supplied is greater than quantity demand -> results in surplus
- Producers have inventory they can't get rid of.
What is price floor?
- It is the lowest legal price a commodity can be sold at.
- Prevents prices from becoming too low
- Ex: minimum wage
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