1.2.3 Supply And Demand Flashcards
What is market equilibrium
Is the point at which demand is equal to supply
Eg where the supply and demand curve crosses
What is market clearing
When all products are sold and no products are left over
What is excess supply
If price were to rise we would have excess supply . Buyers would demand less at the higher price but firms would wish to supply more at this price
How to solve the problem of excess supply
Need to lower price to get rid of excess products
What his excess demand
If price were to fall we would have a position of excess demand . Buyers would demand more at the lower price but firms would wish to supply less at this price
How to improve excess demand
To improve profitability firms could raise price , thus reducing the excess demand
What are always pushing prices towards market equilibrium
Market forces
A change in price will lead to a movement
Along the supply and demand curve
A change in any other factor will lead to a
Shift in the demand or supply curve
A shift in curve will occur due to changes in
Consumer income
Consumer tastes
Prices of other goods
A shift in the supply curve will occur due to changes in
Impact is changjng class of production
Technological processes
Price of other goods
Taxes / subsidies
