1.10 Price Determination Flashcards
1
Q
What is a market?
A
A market is anywhere where buyers and sellers meet to exchange goods and services
2
Q
What is excess demand?
A
Excess demand is when there is too much demand in relation to supply
3
Q
How do you show excess demand on a diagram?
A
It is the difference between q1 and q2
4
Q
What is excess supply?
A
Excess supply is when there is too much supply in relation to demand
5
Q
How do you show excess supply on a diagram?
A
Q1 to Q2 above the intersection of the S and D line
6
Q
How is excess supply eliminated by market forces
A
Reduce prices to sell off excess supply
7
Q
How is demand eliminated by market forces
A
Put the price up and demand will decrease
8
Q
What is the equilibrium price?
A
This is where the demand equals supply.
Where consumers and producers willingly meet
