Equilibrium

Question 1

shortage

Answer 1

When there is excess demand for a good or service.

Question 2

Surplus

Answer 2

When there is excess supply for a good or service.

Question 3

price mechanism

Answer 3

The interactions between consumers and producers that allocate resources and determines prices of goods and services.

Question 4

Signalling function

Answer 4

Provides information to consumers and producers on where resources should be allocated.

Question 5

Incentive Function

Answer 5

Provides motivation for consumers and producers to change their behavior to maximize profits.

Question 6

Rationing Function

Answer 6

Ensures scarce goods and services deter consumers by raising prices.

Question 7

Consumer Surplus

Answer 7

The gain of all consumers who can consume a product at a lower price than what they were willing and able to pay.

Question 8

Producer Surplus

Answer 8

The gain of all producers who can produce a product at a higher price than what they were willing and able to earn.

Question 9

social surplus

Answer 9

he sum of consumer and producer surplus.

Question 10

Allocative Efficiency

Answer 10

The social optimum when resources are distributed in the most effective and beneficial way.

Question 11

Market Failure

Answer 11

The inability of the free market to achieve allocative efficiency.