ECON: Chapter 6

Supply and Demand together

shortage

a condition where the quantity demanded is greater than the quantity supplied at the market price

surplus

-the amount of an asset or resource that exceeds the portion that is utilized
-occur when there is more supply than demand

excess demand

-where the demand for goods and services exceeds that which the firms can produce
-below equilibrium

excess supply

-the quantity of a good or service supplied is more than the quantity demanded
-above equilibrium

price floor

the lowest legal price that can be paid in a market for goods and services, labor, or financial capital

price ceiling

maximum price that can be legally charged for a good

example of price floor

minimum wage

example of price ceiling

rent control

below equilibrium

excess demand = shortage

above equilibrium

excess supply = surplus

market force

the actions of buyers and sellers that cause the prices of goods and services to change without being controlled by the government

equilibrium

Qd = Qs

disequilibrium

situation where internal and/or external forces prevent market equilibrium from being reached or cause the market to fall out of balance

scalper

a person who buys large quantities of in-demand items, such as new electronics or event tickets, at regular price, hoping that the items sell out

subsidized housing

government sponsored economic assistance aimed towards alleviating housing costs and expenses for impoverished people with low to moderate incomes

section 8

-The Housing Choice Voucher Program
-helps families with a low income, seniors, and people with disabilities pay for rental housing

5 factors that shift the demand curve

1) income
2)consumer taste/preference
3) consumer expectations
4) complements and substitutes
5) market size

6 factors that shift the supply curve

1) cost of inputs
2) labor productivity
3) technology
4) government action
5) expectations
6) numbers of sellers

how do sellers react to an increase or decrease in price?

if price increases, they are willing to produce more
if price decrease, they are not willing to produce more

What will sellers do if they are experiencing a shortage? A surplus?

raise prices with shortage, decrease price with surplus

How are prices determined in the market?

supply and demand

What are the two instances that can cause the equilibrium to change?

change in supply and change in demand

speculators

investors or traders who purchase assets for short periods of time and employ strategies in order to profit from changes in its price