Concept 2 : Price Determination

Question 1

What is equilibrium?

Answer 1

The Price where Demand & Supply are equal

Question 2

In a situation, where there is disequilibrium and the price for a product is too high, there is excess…..?

Answer 2

Supply

Question 3

In a situation, where there is disequilibrium and the price for a product is too low, there is excess…..?

Answer 3

Demand

Question 4

Put the following statements in order to explain a situation where the price is too high:

The price is above the market equilibrium
The price needs to be lowered (contracted)
Supply will contract
Demand will extend
Back to Equilibrium

Answer 4

The price is above the market equilibrium
The price needs to be lowered (contracted)
Demand will extend
Supply will contract
Back to Equilibrium

Question 5

Put the following statements in order to explain a situation where the price is too low:

Supply will extend
The price is below the market equilibrium
Demand will contract
Back to Equilibrium
The price needs to be increased (extended)

Answer 5

The price is below the market equilibrium
The price needs to be increased (extended)
Demand will contract
Supply will extend
Back to Equilibrium