Equilibrium Market Prices

Question 1

What does equilibrium mean?

Answer 1

Equilibrium exists where there is a state of balance and thus no tendency for change.

Question 2

What is equilibrium price?

Answer 2

Equilibrium price is the price, where the amount consumers demand equals the amount producers supply.
Demand & supply are in balance.

Question 3

How is equilibrium price set?

Answer 3

Market price occurs when demand equals supply.

Question 4

Define excess supply

Answer 4

Excess supply exists when supply exceeds demand at a given price.

Question 5

Define excess demand

Answer 5

Excess demand exists when demand exceeds supply at a given price.
Consumers are unable all the want at that price.

Question 6

Explain market shortage

Answer 6

Shortages occur in markets when demand exceeds supply at a given price.
Consumers are unable to buy all they want at that price.

Question 7

What is a market surplus?

Answer 7

Supply exceeds demand at a given price, producers are unable to sell all they want at that price.

Question 8

What does clearing price mean?

Answer 8

The market clearing price is the one price, which leaves neither unsold products nor unsatisfied demand in equilibrium price.

Question 9

What is equilibrium output?

Answer 9

Equilibrium output is the amount traded at the equilibrium price.

Question 10

What causes a change in market price?

Answer 10

Market price changes in response to a change in 1 of the underlying non-price conditions of supply or demand