Market Equilibrium

Question 1

What is an equilibrium?

Answer 1

An equilibrium is where supply curve amount and demand curve amount equals

Question 2

How do we call equilibrium price in another way?

Answer 2

Market clearing price

Question 3

What is the upper part of equilibrium?

Answer 3

It’s surplus where amount of supplies are more than amount of demands aka excess supply

Question 4

What is the lower part of equilibrium?

Answer 4

It’s shortage where amount of demand is more than the amount of supplies aka excess demand

Question 5

If there was a surplus, what can we do to bring it back to original equilibrium?

Answer 5

1. Lower the price => higher demand => supply decrease and go back to original equilibrium
2. Store and sell them when available again

Question 6

If there was a shortage, what can we do to bring it back to original equilibrium?

Answer 6

1. Increase the price => lower demand and go back to original equilibrium
2. Produce more by using resources to catch up the demand