Step 6: Floors and ceilings are very different in economics (End of Unit 1)

Equilibrium v. Disequilibrium

Equilibrium - the point at which supply and demand intersect
-at this point resources are used efficiently

Disequilibrium - supply and demand don't intersect at all
-at this point resources are being used inefficiently

Price Ceiling v. Price Floor

Price Ceiling - Government imposed price control on how high a price can be charged for a product or service
-Protects consumers
-Below the equilibrium
-Rent Control (like in New York, NY, and San Francisco, CA)

Price Floor - Government imposed price control on how low someone can charge for a product or service
-Protects businesses

-Above the equilibrium
-Minimum wage

Where supply and demand intersect is the equilibrium. The lines above and below the equilibrium are the price floor and price ceiling, respectively.

Abbreviations useful to know when dealing with Supply

-Q                    -                    Quantity

-TR                  -                   Total Revenue

-TFC                -                   Total Fixed Cost

-TVC                -                   Total Variable Cost

-TC                   -                   Total Cost

-MC                  -                   Marginal Cost

-AFC                 -                  Average Fixed Cost

-AVC                 -                  Average Variable Cost

-ATC                  -                 Average Total Cost

Formulas useful to know when dealing with Supply

-TR = P x Q
-MR = TR(New) - TR(Old)

-MC = TC(New) - TC(Old)
-TC = TFC + TVC OR ATC/Q 
-AFC = TFC/Q
-AVC = TVC/Q
-ATC = AFC + AVC OR TC/Q

Marginal Revenue

-The additional income from selling one more unit of a good

Fixed Cost

-Does not change (fixed) no matter how much of a product is produced
-Rent/mortgage

Variable Cost

-Fluctuates, depending on how much is produced
-cellphone/electricity/gas bill

Marginal Cost

-cost of producing one more unit of a good