Lesson Plan
Market Equilibrium and Applications
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I. Market equilibrium
- - Definitions
- - equilibrium
- - stable equilibrium
- - How does the market attain equilibrium?
- - excess demand or a shortage
- - price competition among consumers
- - excess supply or a surplus
- - price competition among suppliers
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II. Predictions about equilibrium P and Q
- - increase in D => what happens to equilibrium P and Q?
- - decrease in D => what happens to equilibrium P and Q?
- - increase in S => what happens to equilibrium P and Q?
- - decrease in S => what happens to equilibrium P and Q?
- - increase in D and increase in S => what happens to equilibrium P and Q?
- - increase in D and decrease in S => what happens to equilibrium P and Q?
- - decrease in D and increase in S => what happens to equilibrium P and Q?
- - decrease in D and decrease in S => what happens to equilibrium P and Q?
- - examples
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III. Applications
- - Price Ceilings
- - definition
- - what is an effective price ceiling?
- - equilibrium
- - enforceable price ceilings?
- - black markets
- - cheating by suppliers
- - Price Floors
- - definition
- - what is an effective price floor?
- - equilibrium
- - supporting an effective price floor
- - government subsidies
- - what is the effect if price floor is not supported?