1.2.6: Price Determination Flashcards by Esther Akinbami

Q

What is the price equilibrium point?

A

Price equilibrium is where supply is equal to demand
Also known as the market clearing price because products supplied to the market are cleaned (bought), but no buyers are unable to buy the goods

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Q

When is there excess demand in the market?

A

When price is set below the equilibrium
As a result, there is a shortage in the market.

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Q

When is there excess supply?

A

If the price is set higher than the equilibrium.
As a result, firms have unsold goods

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