Chapter 9- Price Determination Flashcards
1
Q
Equilibrium Price
A
Equilibrium Price: the price where demand and supply are equal
2
Q
Excess Supply
A
Excess Supply: the amount by which supply is greater than demand
3
Q
Disequilibrium
A
Disequilibrium: A situation where demand and supply are not equal
4
Q
Excess Demand
A
Excess Demand: the amount by which demand is greater than supply
5
Q
How prices are determined
A
In some cases there is direct bargaining between buyers and sellers. Buyers try to drive down the price while traders try to keep it relatively high. In other cases firms estimate and then charge the equilibrium price (price where demand and supply are equal). If thet cant sell the product at this price, they will lower it, on the other hand, if there is more demand than supply, they will increase the price.
