Price Ceiling and Price Floor
Notes from (1/20/16)
Equilibrium- Where supply and demand lines intersect on a graph
-All resources are being used efficiently and everything is balanced
Price Ceiling- A limit on how high the price of a product can be
-Ceiling below the equilibrium causes a shortage
-To be effective, must be set above the equilibrium
Price Floor- The lowest legal price a product can be sold
-Floor above the equilibrium will cause a surplus
-Used by governments to prevent prices from being too low
-Ex.: Minimum Wage
Excess Demand- Quantity demanded is greater than Quantity supplied.
-Results in shortages
Excess Supply- Quantity demanded is less than Quantity supplied.
-Results in a surplus
-JaelyNoTainted
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