Market Equilibrium Flashcards
what is equilibrium price,
the price where supply and demand are equal
what is eqilibrium also known as and why
market clearing price because equilibrium is the price where all products are bought up (cleared)
how is total revenue calculated
by multiplying the price with the quantity at the equilibrium price
how is total revenue displayed on a supply demand graph
revenue is the area under equilibrium, so the equilibrium price would be the top right corner of the square, the origin would be the bottom left, and the area of that square would be the revenue
what is total revenue
the total amount of money generated from the sales of goods
what is excess demand
when the demand is higher than the supply so there is a shortage of products in the market
how is excess demand display on a graph
if the supply is lower than the demand, then the point on the supply curve would be the bottem left corner, and the point on the demand curve would be the bottom right corner and the top corner would be the equilibrium price, and this would form a triangle for which its area would be the excess demand
what is excess supply
if the supplu is higher than the demand then there will be a surplus of goods in the market, the top left point would be supply and the top right point would be the demand, and the bottom corner would be equilibrium price, and the 3 points would form an upsidedown triangle, for which its area would be the excess supply
what are the 2 ways to remove excess demand
producers can raise the price to lower the incentive to buy the product, evening lower the demand to reach equilibrium,
alternatively producers can employ supply and resources to increase supply so that the supply would match equilibrium, this can cost money
what are the 2 ways to remove excess supply
producers can lower their prices to make sure that the demand rises to equilibrium, creating an incentive for conusmers to buy cheap products
alternatively producers can sore the surplus products for a later date, however this can cost money for storage and sometimes isnt as feasible as products such as freshfood needs to be consumed quickly
what is surge pricing
the practise where companies raise the prices sharply during rush times such as christmas or new year, where demand for services is high, in order for demand to decrease, such as uber who do this, this would lessen demand and aswell as create an incentive for drivers who are dormant, to get back on the road for a payday
