Lecture 5 Flashcards

1
Q

Describe what market Equilibrium is

A

Equilibrium is a situation in which opposing forces balance each other.
Equilibrium in a market occurs when the price balances the plans of buyers
and sellers.
(when the graphs intercept)

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2
Q

What is equilibrium price

A

The equilibrium price is the price at which the quantity demanded equals the
quantity supplied

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3
Q

What is equilibrium quantity

A

The equilibrium quantity is the quantity bought and sold at the equilibrium
price

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4
Q

Describe a surplus

A

At prices above the
equilibrium price, a
surplus forces the price
down. (the product is too expensive and not being sold)

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5
Q

Describe a shortage

A

At prices below the
equilibrium price, a
shortage forces the price
up. (demand is very high, people will pay more)

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6
Q

Is there a shortage or surplus at equilibrium price?

A

Neither. At the equilibrium price, buyers’ plans and sellers’ methods agree, and the price doesn’t change until an event changes demand or supply.

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7
Q

what happens when demand decreases?

A

-Price decreases
-quantity supplied decreases
-curve shifts leftward
-at OG price there is a surplus

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8
Q

What happens when demand increases

A

-increase in price
-increases in quantity supplied
-curve shifts rightward
-at OG price there is now a shortage

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9
Q

What happens when supply increases?

A

-Price decreases
-quantity increases
-curve shifts rightward
-at OG price, there is now a surplus

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10
Q

What happens when supply decreases

A

-price increases
-quantity demanded decreases
-curve shifts leftward
-at OG price, there is now a shortage

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11
Q

What happens when both supply and demand increase?

A

-increases equilibrium quantity
* the change in equilibrium price is uncertain because the increase in demand raises the price and the increase in supply lowers it*

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12
Q

What happens when demand and supply decrease?

A

-decreases equilibrium quantity
* price is uncertain because a decrease in demand lowers price and a decrease in supply raises price*

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13
Q

What happens when demand decreases and supply increases?

A

-lowers equilibrium price
-change in equilibrium quantity is uncertain

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14
Q

What happens when demand increases and supply decreases?

A
  • raises equilibrium price
    -change in equilibrium quantity is uncertain
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