Equilibrium price Flashcards
1
Q
What is equilibrium price?
A
Where the quantity demanded exactly matches the quantity supplied (no excess)
2
Q
How does excess demand affect price?
A
If there is excess demand then the price will be increased so that less people want to buy the product, and therefore will match supply
3
Q
How does excess supply affect price?
A
If there is excess supply then the price will be lowered so that more people will buy the product, and therefore get rid of the waste
4
Q
How can we calculate revenue from a supply and demand diagram?
A
Revenue= unit price x quantity sold
The area between the price and quantity on the diagram is the total revenue
