Chapter 4: Flashcards
What is equilibrium?
The price at which the quantity demanded matches the quantity supplied.
- The point where the supply and demand curve meet.
What is a surplus?
Any situation in which quantity supplied is greater than the quantity demanded.
What happens to price as the result of a surplus?
The price decreases.
What is a shortage?
Any situation in which the quantity demanded is greater than the quantity supplied.
What happens to price in a shortage?
It goes up.
If the supply is less than the minimum quantity and buyers are willing to purchase the supply, this is known as?
unexploited gains from trade.
If the quantity is greater than the point of equilibrium it is known as?
Waste of resources.
What is the result if the supply increases and the demand remains the same?
It creates a surplus, which in turn drives the new equilibrium to a lower price and increased quantity.
What is the result of a demand increase and the supply amount staying the same?
- It creates a shortage at the equilibrium quantity.
What is the result of a demand increase and the supply amount staying the same?
- This creates a shortage that drives the equilibrium price up, which causes the quantity supplied to also increase with the price.
How do you tell the differences between a shift in the supply curve vs the quantity supplied?
- Supply curve: is a shift of the entire supply curve.
- Quantity supplied: a change in quantity supplied is a movement along a fixed supply curve. (demand curve)
How do you tell the difference between the demand and the quantity demanded?
Quantity demanded: a change along the fixed demand curve. (the supply curve shifts)
Demand curve: a change in demand is a shift of the entire demand curve ( up and to the right)
