Supply and Demand part 3: Price celings and Price floors (01/20/17)

Equilibrium

Is the point at which the supply curve and the demand curve intersect.

Excess demand - it occurs when quantity demanded is greater than quantity supplied. QD>QS.

Shortage -where consumers can not get enough of the quantities they desire.

Price ceiling

• it creates a shortage.
• It occurs when the government puts a legal limit on how high the price of a product can be.
• It is below the equilibrium .

Ex: the government putting price ceiling on the flu shots, rent control

RENT CONTROL:

An illustration of price ceiling and price floor

Excess supply - it occurs when quantity supplied is greater than quantity demanded. It will create a surplus (invention that they can not get rid of). QS>QD.

Price floor- it is the lowest price a commodity can be sold at. Are used by the government to prevent prices from becoming too low.

Ex: Minimum Range.