Gretel's AP Macroeconomics Blog

Price Ceilings and Floors Price Ceiling A legal maximum price meant to help buyers Keeps price from getting too high Prevents price gouging (when a seller spikes the  prices  of goods, services or commodities to a level much higher than is considered reasonable or fair.) BELOW THE EQUILIBRIUM POINT !!! 4 Consequences of a Too Low Price Ceiling  A lower price for some consumers Shortages Long lines for buyers Illegal sales above the equilibrium price Price Floor A legal minimum price meant to help sellers Keeps product price from falling  Ex. Minimum Wage ABOVE THE EQUILIBRIUM POINT !!! 4 Consequences of a Too Low Price Floor Higher product price will help a few sellers A surplus Higher taxes Waste

Costs of Production Fixed Cost : A cost that doesn't change, no matter how much is produced. Variable Cost : A cost that rises or falls depending upon how much is produced.  Ex. Electricity bills Total Cost:    Fixed Cost + Variable Cost = Total Cost (TC) Marginal Revenue: The additional income from selling one more unit of a good Marginal Cost: The cost of producing one more unit of a good. Total Revenue: Price ✕ Quantity = Total Revenue  Formulas: TFC + TVC = TFC AFC + AVC = ATC TFC / Q = AFC AFC  ✕  Q = TFC TVC / Q = AVC AVC  ✕  Q = TVC TC /  Q = ATC