A situation where ​the market looks for:

-stable prices

​-The quantity supplied is equal to the quantity demanded

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Markets look for equilibrium

-​The price that brings equilibrium to the market.

​-​It is usually found through "trial and error".

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​Equilibrium Price

-A situation where demand is lower than supply.​

-Caused by:

High prices

Changes in ​consumer taste​

​Over production

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​Surplus in the Market

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-Lower prices on surplus goods​

​​​-Cuts in production​​

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Remedies for Surplus​

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​-A situation where demand is greater than supply.

-​Caused by:

Lower than normal prices​

​Shortages of resources

Natural disasters​

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Shortage in the Market

-Raise prices

-​Increase production​

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​Remedies for Shortage

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-Price Ceilings

-Price Floors​

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Two artificial market conditions​

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-Maximum legal price that can be charged for a product.

-The price is lower than equilibrium.

-Creates shortages, but it's felt necessary ​​for equity.

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Price Ceiling

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Example of Price Ceiling

​-Some apartment buildings in NYC have rent controls.

-This lowers costs and makes apartments more affordable.

-These apartments are limited.​

​-Minimum legal price that can be charged for a product.

-The price is higher than equilibrium.

-Creates a surplus, but it's felt necessary ​​for equity.

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Price Floors

​-Minimum wage is the lowest level of pay allowed.

-Some economists think it's above equilibrium and should be allowed to go lower.

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Example of a Price Floor