Econ 1201 1st Edition Lecture 3Outline of Last Lecture II. Last lecture continued (Economic Systems)III. Demand (& changes in demand)IV. Supply (& changes in supply)Outline of Current Lecture - EquilibriumV. What is EquilibriumVI. Changes in EquilibriumVII. Price ControlsCurrent LectureI. Equilibrium (where supply and demand meet) :- If price is set too high, the quantity supplied will be higher than quantity demanded surplus.- If you lower the price but still above equilibrium, the quantity supplied will decrease- Downward pressure until equilibrium is reached- If the price is set too low, there will be less supplied than demanded and that will result in a shortage.- Upward pressure o price until equilibrium is reachedThese 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.Consumer Surplus: Willing to pay a certain amount and you purchase it for less than that amount.(Societal measure of wellbeing) II. Changes in Equilibrium (using marijuana market)1) Prohibition of Alcohol – increases demand of marijuana- Demand^, Price^, Quantity^ (increase in entire demand curve)2) Stricter laws on drug users – people will demand less- D , P, Q3) Positive change in weather (good weather, better soil etc.), right shift of supply curve.- Growers will find out they have a SURPLUS and have to sell at lower price- S^, P, Q^4) If sellers find different type of marijuana to sell- (Might switch to that market, lead to change in price of originaltype that uses similar resources) soS , P^, QNow, say you LEGALIZE marijuana… what will happen?- Demand will increase, supply will increase- Quantity demanded will increase but*** We can’t tell what happens to price! (Dependent on different situations) ***- When supply shifts right, the price decreasesDemanders find out about health concerns of marijuana:- Price will decrease because if S^ or D , P*** Quantity depends on the situation! ***III. Price Controls:Labor Market:- Demand comes from firms- Supply comes from householdsTheoretical Situation: Want a higher wage- As quantity demanded decreases, quantity supplied increases because more people want to work and less firms want to pay for expensive labor  leads to unemployment- Price floor (living wage) = least amount you can pay employers (keeps price from reaching or falling below equilibrium.Theoretical: Want lower rent payments (housing market)- Rent controls on low income housing- Price Ceiling: stops rent payment from getting above equilibrium- (Refer to case study about rentals in