1.2.3 : Market Equilibrium

Question 1

What does market equilibrium mean?

Answer 1

Means a state of equality or balance between market demand and supply

Question 2

Hat does an outward shift of market demand do to the equilibrium price ?

Answer 2

An outward shift of market demand causes a rise in equilibrium price and an expansion of market supply

Question 3

What will an outward shift of market supply do to an equilibrium price ?

Answer 3

An outward shift of market supply will cause the equilibrium price to fall and an expansion of the market

Question 4

What is excess supply ?

Answer 4

This occurs when the price of a good is above the equilibrium price - at this higher price producers are willing to supply more goods than consumers are willing to buy leading to a surplus

Question 5

What is excess demand ?

Answer 5

This occurs when the price of a good is below the equilibrium price , consumers want to buy more than the producers are willing to supply meaning there is an excess in demand

Question 6

What are the different shifts for the demand curve ?

Answer 6

When the demand curve shifts to the right (increase in demand) the equilibrium price + quantity both rise
When the demand curve shifts to the left (decrease in demand) the equilibrium price + quantity both fall

Question 7

What are the different shifts for the supply curve ?

Answer 7

When the supply curve shifts to the right (increase in supply) the equilibrium price + quantity increases
When the supply curve shifts to the left (decrease in supply) the equilibrium price + quantity decreases