Market equilibrium

Question 1

Definition of market equilibrium

Answer 1

it is a state of balanced supply and demand. It occurs when supply and demand curves intersect

Question 2

What happens when there is market equilibrium?

Answer 2

consumers get the amount of goods they want while suppliers can also sell their goods and prices become stable.

Question 3

What happens when the price is below equilibrium?

Answer 3

There will be a shortage because Qd is greater than Qs. The low prices will satisfy the consumers. On the other hand, suppliers will not be satisfied because they prefer higher prices. Thus, there will be a disagreement between consumers and suppliers.

Question 4

What happens when the price is above equilibrium?

Answer 4

There will be an amount of goods that exceeds the portion needed. It is called surplus and it results in greater supply than demand. It satisfies the suppliers because the price is high but it won’t satisfy the consumers because they don’t want high prices.

Question 5

What happens when there is a shortage?

Answer 5

When a shortage occurs, they pull prices up temporarily since it creates an imbalance where D exceeds S. Pulling prices up will balance D and S.

Question 6

What happens when there is a surplus?

Answer 6

When a surplus occurs, prices will fall so that D will increase and suppliers can sell off excess products.