1. 3b Equilibrium Price EPF 3. Demonstrate knowledge of the price system

2. Equilibrium Price Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services. Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives.

3. What is a market? Essential Question:

4. Market A market exists when buyers and sellers exchange goods and services

5. How are market prices determined? Essential Question:

6. Market Prices Determined Market prices are determined through the buying and selling decisions made by buyers and sellers

7. What is equilibrium price? Essential Question:

8. The equilibrium price of a good or service is the one price at which quantity supplied equals quantity demanded. Equilibrium Price

9. How can a supply and demand graph be used to find equilibrium price? Essential Question:

10. Graphing Equilibrium Price Equilibrium price and quantity are revealed on a supply-and-demand graph where the supply and demand curves intersect. Equilibrium Price

11. What happens when price for a good or service is higher than the equilibrium price? Essential Question:

12. Price is higher than Equilibrium If the price is above the equilibrium price, buyers will purchase less than is available, and suppliers will offer more, creating a surplus. When a surplus exists, prices will decrease until they reach the equilibrium price.

13. What happens when price for a good or service is lower than the equilibrium price? Essential Question:

14. If the price is below the equilibrium price, buyers will want to buy more than is available, and suppliers will want to supply less. This will result in a shortage. Buyers will bid the price upuntil it reaches equilibrium price. Price Lower than Equilibrium

15. How does the graph show what happens to the equilibrium price when one of the determinants of demand or supply changes? Essential Question:

16. When one of the determinants of demand changes, the demand curve will shift, resulting in a new equilibrium price and quantity. When one of the determinants of supply changes, the supply curve will shift, resulting in a new equilibrium price and quantity How Changes Affect the Graph