Ch.+6.1


 * **Ch. 6.1 Questions #1-6**

B. 6. The benefits of having a price ceiling is a price cannot be too high and a drawback would be producers don't make as much money as they would like to.
 * the market system makes certain that consumers can buy the products they want, sellers make enough profit to stay in business, and that sellers respond to changing needs and tastes of consumers
 * Balancing the Market**
 * demand schedule shows how much consumers are willing to buy at various prices
 * a supply schedule shows how much sellers are willing to sell at various prices
 * Defining Equilibrium**
 * the point where demand and supply come together at the same number of units is called **Equilibrium**
 * Equilibrium is the point of balance between price and quantity, at equilibrium the market for a good is stable
 * to find the equilibrium price and equilibrium quantity simply look for the price at which the quantity supplied equals the quantity demanded
 * quantities supplied and demanded will be equal at only one price and one quantity, at this equilibrium price buyers will buy exactly as much of the product as firms are willing to sell
 * Graphing Equilibrium**
 * equilibrium price and quantity can be found where quantity supplied equals quantity demanded or the point where the supply curve crosses the demand curve
 * Disequilibrium**
 * if the market price or quantity supplied is anywhere but at the equilibrium, the market is in a state that economists call disequilibrium.
 * **Disequilibrium** occur when quantity supplied is not equal to quantity demanded in a market
 * disequilibrium can cause one of two outcomes, excess demand or excess supply
 * Excess Demand**
 * The problem of **excess demand** occurs when quantity demanded is more than quantity supplied
 * when the actual price in a market is below the equilibrium price, you hve excess demand because a low price encourages buyers and discourages sellers
 * if you have 150 units but your demand is 250, you are in excess of demand of 100 units
 * when customers want to buy 100 more units they will be waiting and some will just end up leaving
 * as long as there is excess demand, and the quantity demanded exceeds the quantity supplied, suppliers will keep raising the price
 * Excess Supply**
 * if the price is too high, then the market will face a problem of excess supply
 * **Excess Supply** occurs when quantity supplied exceeds quantity demanded
 * if you have 250 units of supply per day and your demand is 150, you made 100 more slices then you need, excess supply
 * when the market is in disequilibrium and prices are flexible, market forces will push the market toward the equilibrium
 * Government Intervention**
 * markets tend toward equilibrium, but in some cases the government steps in to control prices
 * the government can impose a **price ceiling** or a maximum price that can be legally charged for a good
 * in othee cases, the government can create a **price floor** or a minimum price for a good or service
 * Price Ceilings**
 * Price ceiling is a maximum price, set by law, that sellers can charge for a good or service
 * government places price ceilings on goods that are considered "essential" and might become to expensive for some consumers
 * **Rent Control** is a price ceiling placed on rent, this was set for those who were poor
 * The cost of Price Ceilings**
 * When the price cannot rise to the equilibrium level, the market must determine which 20,000 of the 40,000 households will get an apartment and which 20,000 won't
 * although governments usually pass rent control laws to help renters with the greatest need, few of these renters benefit from rent control
 * People can take advantage of rent control, such as those who are wealthy, but in New York that was changed because of rent control abuse
 * Ending Rent Control**
 * If rents were allowed to rise to the market equilibrium level, which is $900 per month, the quantity of apartments in the market would actually rise to 30,000 apts.
 * the market would be in equilibrium and people who could afford $900 a month would have an easier time finding vacant apts.
 * though this would be bad because those who originally were able to afford their rent would no longer be able to afford it because the landlord would be able to legally raise the price of rent
 * Price Floors**
 * A price floor is a minimum price, set by the government, that must be paid for a good or service
 * price floors are often imposed when government wants sellers to receive some minimum reward for their efforts
 * The Minimum Wage**
 * One well known price floor is the **minimum wage**, which sets a minimum price that an employer can work for an hour of labor
 * The federal government sets a base level for the minimum, and states can set their ownminimum wages even higher
 * A full time worker beingnpaid the federal minimum wage will earn less than the federal government says is necessary to support a couple with one child
 * If the minimum wage is set above the market equilibrium wage rate, the result is a decrease in employment
 * The supply curve of labor, which shows the number of worker hours offered at various wage rates, and a demand curve for labor, which shows the number of workers employers will hire at various wages
 * If the minimum wage is below the equilibrium rate, it will have no effect because employers would have to pay at least the equilibrium rate anyway to find workers in a free market
 * 1) It is the point of balance between price and quantity
 * 2) Producing 150 units and habing demand for 250 units, you're short 100 units
 * 3) Price floor is the minimum price for a good and price ceiling is the maximum price for a good
 * 4) Rent control sets a maximum price that a landlord cannot exceed in charging for rent
 * 5) A.