Chapter 3 - EQ Flashcards

1
Q

MARKET EQUILIBRIUM

A

when markets work well – > the quantity supplied exactly EQUALS the quantity demanded

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2
Q

(GRAPHICALLY) MARKET EQUILIBRIUM

A

this convergence of supply w/ demand = happens at the point where the demand curve = intersects the supply curve

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3
Q

EQUILIBRIUM PRICE

A

the price at this point

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4
Q

EQUILIBRIUM QUANTITY

A

quantity at this point

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5
Q

INTERSECTION OF MARKET EQ

A

where quantity supplied equals quantity demanded – > as the point at which buyers & sellers = agree on the quantity of a good they are willing to exchange at a given price.

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6
Q

MARKET-CLEARING PRICE

A

because every seller = finds a buyer @ the equilibrium price & quantity, and no one = left standing around w/ extra goods / an empty shopping cart

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7
Q

How does a market reach equilibrium?

A

do sellers know intuitively what price to charge?

–> No. instead they tend to set prices by trial & error OR by past experience w/ customers

–> The incentives buyers & sellers face = will naturally drive the market toward equilibrium –> as sellers raise or lower their prices in response to customers’ behavior

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8
Q

(SURPLUS) EXCESS QUANTITY SUPPLIED

A

when the quantity supplied = higher than the quantity demanded

–> Manufacturers = stuck holding extra phones in their warehouse –> they want to sell that stock & must reduce the price to attract more customers

–> They have an incentive to keep lowering the price until quantity demanded = increases to reach quantity supplied

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9
Q

(SHORTAGE) EXCESS QUANTITY DEMANDED

A

when the quantity demanded = higher than the quantity supplied

–> Producers = will see long lines of people waiting to buy the few available cell phones & will quickly realize that they could make more money by charging a higher price

–>They have an incentive to increase the price until quantity demanded decreases to equal quantity supplied –> and no one is left standing in line

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