Market Equilibrium (5)

Question 1

Explain:

Equilibrium?

Equilibrium price? Equliirbium quanitity? What’s its other name?

Answer 1

The point at which the supply and demand curves intersect
Equilibrium price: The price of a good at equilibrium
Equilibrium quanitity: The quanitity of a good at equilibrium

Equilibrium is ALSO CALLED Market-Clearing Price

Question 2

Define:

Surplus?

What’s its other name? Caused because of SHIFTS or ALONG the curve?

Answer 2

Producers are unable to sell all they want at the going price
Quantity Supply > Quantity Demanded
Surplus is also called a situation of EXCESS SUPPLY

Caused by movement ALONG the curve

Question 3

Define:

Shortage?

What’s its other name? Caused because of SHIFTS or ALONG the curve?

Answer 3

Consumers are unable to buy all they want at the going price
Quantity Supplied < Quantity Demanded
Shortage is also called a situation of EXCESS DEMAND

Caused by movement ALONG the curve

Question 4

Define:

Law of supply and demand?

Answer 4

The price of any good adjusts to bring the quanitity supplied and the quantity demanded into balance