Econ 2023 1st Edition Lecture 6 Outline of Last Lecture I. Market equilibrium:a. Efficiency.b. Shortages and surpluses.Outline of Current Lecture I. Changes in the marketa. Shift v movementsII. Price controlsa. Price floors b. Price CeilingsIII. Other factors and wrapping chapter three up.Current LectureI. Changes in the market: a. Demand shifters: change in: i. Tastes and preferences, income, expectations, prices of other goods, number of consumers.b. Supply shifters: changes in: i. Natural conditions, Cost (prices of inputs, technology, government taxes, subsidies, regulations…) expectations, prices of other goods, and number of suppliers.c. Shift vs. Movement along:i. Shift: prompted by previous shifting ex above. The Demand is increased or decreased.ii. Movement along curve: same curve just moving along it, ex. if price changes. Increase in quantity demanded.II. Price controls: price floor (effective):a. Something to prevent from prices getting back to equilibrium are price controls. b. Price floor: the lowest the price can drop to. Effective (matters/has impact) is that it is above the equilibrium price- creates surpluses. Can lead to more unemployment though. c. Price ceiling: the highest price is able to go to. Effective (matters/has impact) is that is it below the equilibrium price- creates shortages. Can lead to III. Analyzing a change in “other” factors:a. Comparative statics: These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Start at initial situation (pre-shift D, S, and Equilibrium)ii. Determine whether the change effects D or S.iii. Draw the new demand curve (D’) or supply curve (S’) after determining which switches and in which direction.iv. Find the new Equilibrium.v. Compare P* and Q* before and after the change.** If there is more than one change, examine them separately and then determine the overall effect. **b. Consequences: not letting the market level out.i. Price floor: artificially high price, quantity demanded decreased, incentiveto produce is high surplus leads to… disposal of surplus, welfare effects, inefficiency. ii. Price ceiling: artificially low price, quantity demanded increases, incentiveto produce is low shortage leads to… non-price rationing (black market?), welfare effects, inefficiency. IV. Summing up: a. Unimpeded: the market moves toward equilibrium i. Changes (shifts) of demand1. Increase (rightward shift) in demand: Price will increase and quantity will increase.2. Decrease (leftward shift) in demand: price will decrease and quantity will decrease.ii. Changes (shift) inn supply1. Increase (rightward shift) in supply: price will decrease and quantity will increase.2. Decrease (leftward shift) in supply: price will increase and quantitywill decrease.b. Impediments: price floors and price