1.2.6 Price determination Flashcards by Max Wooldridge | Brainscape

Q

What is Price equilibrium?

A

The unique point where the quantity demanded by consumers is balanced with the quantity that firms wish to sell (supply is equal to demand).

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Q

Another time for Price equilibrium is…

A

Market Clearing

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Q

What is Excess demand?

A

When price is set below equilibrium
So there is excess demand and there’a too little supply
Here the firm would usually increase pricing to lower demand

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Q

What is Excess Supply?

A

Where the price is set higher than equilibrium
So there is excess supply as there is too little supply
Here the firm would usually decrease in pricing to increase demand

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Q

Excess Supply or Excess demand?

A

Demand

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Q

Excess Supply or Excess demand?

A

Supply

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