Equilibrium Price Flashcards
1
Q
what is the equilibrium price
A
balances buying and selling intentions and clears the market
2
Q
what is surplus to do with price
A
excess supply = price decrease
the price is too high to clear market supply so it will be lowed until it reaches equilibrium
3
Q
how does surplus affect the curve
A
as price falls consumers move down along demand curve, sellers move down the supply curve
4
Q
what is shortage to do with price
A
excess demand = price rises
price is too low to clear the market so price will rise until eql is reached
5
Q
how does shortage affect the curve
A
consumers move up along the demand curve and suppliers move up along supply curve
6
Q
what is the price mechanism
A
the pressures for changes in price in response to a change in D and S conditions in competitive market
