Chapter 6 Econ Summary 
Price: Supply and Demand Together  
Jamie Ramseyer  Mason Elias            Mr. Treadway |Period 3

Overview      This chapter is about supply and demand.  It discusses when there is a surplus, or when there is more supply than demand, and shortages, when there is more demand than supply.  It discusses equilibrium as well, and how for a market to be successful, then they need to have equilibrium, or when supply and demand are equal.  It also talks about price ceilings, when a buyers and sellers cannot legally buy or sell goods for a higher price than the price ceiling.  Same goes for price floors excpet buyers and sellers cannot legally buy or sell goods for a lower price than the price floor.  Lastly, this chapter discusses how supply and demand relate to everyday life, such as buying a house in California as opposed to Kentucky, and why the price of a house in CA would be higher than in KY.   

KEY TERMS    

Surplus- the condition in which the quantity supplied of a good is greater than the quantity demanded. Surpluses occur only at prices above equilibrium price  

Shortage- the condition in which the quantity demanded of a good is greater than the quantity supplied. Shortages occur only at prices below equilibrium price  

Equilibrium- in a market the point at which the quantity of a good that buyers are willing and able to buy is equal to the quantity that sellers are willing and able to produce and offer for sale (quantity demanded equals quantity supplied)  

Equilibrium Quantity- the quantity of a good that is bought and sold in a market that is in equilibrium  

Equilibrium Price- the price at which a good is bought and sold in a market that is in equilibrium  

Inventory- the stock of goods that a business or store has on hand  

Price Ceiling- a legislated price- set lower than the equilibrium price- above which buyers and sellers cannot legally buy and sell a good  

Price Floor- a legislated price- set above the equilibrium price- below which buyers and sellers cannot legally buy and sell a good  



Comprehension/Critical Thinking and Writing   

My friend Blas's dad told him that they had tickets to the Cowboys vs. Packers game at Lambeau Field on November 14, 2009. He then told Big Game this, knowing that Big Game was a ginormous Cowboys fan. Once Big Game heard this, he demanded that Blas supply him with at least uno ticket. Unfortunately, Blas's father, Eric Grove, only had a quantity supplied of dos tickets. This disgusted Big Game, seeing as his quantity demanded was tres total tickets. Obviously, there is a shortage of tickets. We expected a surplus because the Cowboys are terrible, but Grover lied to us. We tried to figure out if we could buy some tickets. We found out that the per-unit cost of a ticket is around $40 depending on who we get them from. If we could get ahold of the tickets then equilibrium would exist instead of a shortage. We had planned on buying at least tres tickets but once we got there, we decided to buy only dos tickets because we saw money flying around, and knew it was ours. :(  We felt diminishing marginal utility taking effect.


  Below is a representation of the situation that Big Game and I experienced.  It shows a decrease in supply because there are not enough tickets for me, him, and dad Grover.  It shows an increase in demand because people are buying so many tickets that there are not enough for all three of us.  This illustrates a shortage.  Overall, it raises the equilibrium price.