Economics Chapter 6 Bringing Supply and Demand Together - PowerPoint PPT Presentation

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Economics Chapter 6 Bringing Supply and Demand Together

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Title: Economics Chapter 6 Bringing Supply and Demand Together Author: Kelsey Halfen Last modified by: wayne.sager Created Date: 2/22/2004 10:52:42 PM – PowerPoint PPT presentation

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Title: Economics Chapter 6 Bringing Supply and Demand Together


1
EconomicsChapter 6Bringing Supply and Demand
Together
2
Balancing the Market
  • Equilibrium

Supply
Price
Equilibrium
Demand
Quantity
3
Market Disequilibrium
  • There are two causes for disequilibrium
  • Excess Demand
  • Excess Supply

4
(No Transcript)
5
  • In some cases the government steps in to control
    prices. These interventions appear as price
    ceilings and price floors.

6
Rent Control Price Ceiling
7
Minimum Wage Price Floor
8
Changes in Market Equilibrium
  • Shifts in Supply
  • Technology, Cost, Government, Imports,
    Expectations, of suppliers
  • Shifts in Demand
  • Income, Expectations, Population,
    Trends/Advertising, Substitutes, Complements

9
Shifts in Supply
  • Understanding a Shift

Old Equilibrium
New Equilibrium
10
Excess Supply
  • Surplus

11
A Fall in Supply
12
Shifts in Demand
  • Excess Demand
  • shortage
  • Search Costs
  • A Fall in Demand

13
Analyzing Shifts in Supply and Demand
14
Analyzing Shifts in Supply and Demand
15
The Role of Prices in a Free Market
16
Advantages of Prices
  • Prices provide a language for buyers and sellers.
  • 4 Advantages

17
4 Advantages
  1. Prices as an Incentive
  2. Signals
  3. Flexibility
  4. Price System is "Free"

18
Efficient Resource Allocation
  • Resource Allocation

19
Market Problems
  • Imperfect competition
  • Spillover costs
  • Imperfect information
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