Market Equilibrium Flashcards
What is equilibrium price?
Price at which supply and demand are equal
What is market clearing price?
Price at which amount supplied in a market matches exactly the amount demanded
What is total revenue?
The amount of money generated from the sales of goods calculated by multiplying price by quantity
When will the equilibrium price change?
During a shift in demand or supply
Draw market equilibrium when shift in demand
Draw market equilibrium when shift in supply
Draw a diagram for shifts in both supply and demand
What is excess demand?
Excess demand is when the demand is greater than the supply and there are shortages in the market
What is excess supply?
Excess supply is when the supply is greater than demand and there is a surplus in the market
How do you calculate excess supply and demand?
You go to the given price and find points on supply and demand curve at that price.
Supply point - Demand point = excess supply
Demand point - Supply point = excess demand
Draw the diagram for excess supply and demand
How would you fix excess demand?
By the producer increasing the price of the good or service
How would you fix excess supply?
The producer would reduce their prices
