- Introduction
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- Task
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Before we start the lesson, read the definitions of vocabulary that will be introduced in the lesson.
Markets and Prices Watch Markets and Prices (2:02) to learn more about markets, prices, and the Circular Flow Model. Be sure to take the practice quiz at the end! Supply Watch Supply (4:35) to learn the basics of the supply curve. This time focus on the market clearing price and how the market clears itself of surpluses and shortages. Be sure to take the practice quiz at the end! Price Floors and Ceilings Sometimes the government tries to help certain groups of people by changing the price of an item. Through legislation government will artificially set the price for the item. When the government does this they are not allowing the market to correct itself and reach equilibrium. Sometimes the government sets a legal minimum price above equilibrium. This is called a price floor because the government will allow the price to go above the price they set, but they will not allow the price to go any lower. When the government wants to set a low price below equilibrium they are establishing a price ceiling. The government will allow the price to go lower than a ceiling, but it cannot go any higher. Watch Price Ceilings and Floors (4:07) to learn more about price floors and price ceilings. Surpluses and Shortages Watch Maquilapolis: Examining Incentives in a Market Economy (7:44) to learn more about how the government can cause surpluses and shortages. |
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