3.5 - the determination of equilibrium market prices Flashcards
what is equilibrium?
where planned demand = planned supply
What is market disequilibrium?
exists at any price other than the equilibrium price, when either planned demand < planned supply or planned demand > planned supply
where is excess supply located on the diagram?
at a price above the equilibrium price
where id excess demand located on the diagram?
at a price below equilibrium price
what is excess supply?
when firms wish to sell more than consumers wish to buy, with the price above equilibrium price
what is excess demand?
when consumers wish to buy more than firms wish to sell, with the price below equilibrium price
what is the demand side of the market?
where individuals/households are willing and able to buy a good or service
what is the supply side of the market?
where firms are willing and able to supply a good or service
what is the short side of the market?
when quantity is limited on one side (either demand or supply) of the market
what is the long side of the market?
when there is a surplus of quantity on one side of the market
