Handout 8(The determination of market equilibrium)

Question 1

What is an equilibrium?

Answer 1

A state of rest and balance between opposing forces

Question 2

What is a market equilibrium?

Answer 2

When planned demand equals planned supply

Question 3

What is Disequilibrium?

Answer 3

imbalance between opposing forces, excess supply or demand

Question 4

What is a shortage?

Answer 4

When the price is set below the equilibrium,

-quantity demanded is higher than supply

Question 5

What is a surplus?

Answer 5

When the price is set above the equalibrium

-quantity supplied is higher than the quantity demanded