6. Markets Flashcards
When is a market in equilibrium?
Where supply and demand are equal, where the wishes of consumers are matched exactly with those of producers
What’s the clearing price?
The same as equilibrium, amount supplied in the markets is completly bought up by consumers
Total revenue/total expenditure (calculation)
Total revenue = price x quantity
Total revenue/total expenditure (explanation)
Is the amount of money generated from the sale of output.
Changes in demand
If demand increases, price will rise. This is because producers react to rising consumer demand by putting up their prices. They can do this because customers want the product in higher numbers.
Changes in supply
If supply increases, the price will fall. This changes equilibrium price because supply and demand are now equal at a different point.
What’s a disequilibrium?
If the price in a particular market is not set at the point where supply and demand are equal, there will be disequilibrium in the market.
What’s an excess of supply?
The position where supply is greater than demand at a given price and there are unsold goods in the market.
What’s an excess of demand?
The position where demand is greater than supply at a given price and there are shortages in the market.
