Equilibrium price Flashcards
1
Q
When does equilibrium occur?
A
when supply = demand
2
Q
What does the price mechanisms refer to?
A
the way that supply and demand interact with each other to create market price
3
Q
Why would price be below equlibrium?
A
if demand is greater supply
4
Q
What happens if demand is greater than supply
A
prices will rise until demand = supply again
5
Q
Why would price over equilibrium?
A
if supply is greater than demand
6
Q
What happens if supply is greater than demand
A
prices fall until supply = demand again
7
Q
What is the impact of an increase in demand
A
in the short term there would be a shoratge however in the end higher demand would lead to an increase in price and supply
