Chapter 5: The interaction of markets

Question 1

Define market equilibrium

Answer 1

A situation that occurs in a market when the price is such that the quantity demanded by consumers is exactly balanced by the quantity supplied by the firms

Question 2

Define excess supply

Answer 2

A situation in which the quantity that firms are willing and able to supply exceeds the quantity that consumers wish to demand at the going price

Question 3

Define excess demand

Answer 3

A situation in which the quantity that consumers wish to demand at the going price exceeds the quantity that firms are willing and able to supply