Market Equilibrium Flashcards
only one price and quantity combination is compatible combination is compatible with the intentions of both buyers and sellers
Equilibrium
Intersection of supple and demand curves
Quantity buyers will buy = quantity sellers will sell
Market price
When price adjusts so that quantity demanded equals quantity supplied
Market Equilibrium
Markets reach ____ because buyers have a demand behavior ( raise price, buy less, and vice versa) and sellers have a supply behavior ( raise price, supply more and vice versa)
equilibrium
The market mechanism leads the market to ___
At equilibrium, quantity demanded equals quantity supplied at the equilibrium
equilibrium
The price at which the quantity demanded equals the quantity supplied
equilibrium price
the quantity bought and sold at the equilibrium price
equilibrium quantity
A market is in equilibrium when price adjusts demanded equals quantity supplied
Market Equilibrium
If price is greater than equilibrium level there will be a surplus which forces price down
Market Equilibrium
A market is in equilibrium when price adjusts so that quantity demanded equals quantity supplied
Market Equilibrium
If price is less than equilibrium level there will be a shortage which forces price up
Market Equilibrium
Price below equilibrium creates shortage
Price above equilibrium creates surplus
Market Equilibrium
Surplus- excess supply
shortage- excess demand
equilibrium - where D = S
Market Equilibrium
the amount by which quantity supplied exceeds quantity demanded at a given price: excess supply
Price is too high
Market Surplus
The amount by which quantity demanded exceeds quantity supplied at a give price; excess demand
Price is too low
Market Shortage
When: Buyers behavior changes ---Demand Shifts right Old equilibrium is upset Creates a shortage ----price rises a new equilibrium is established price rises from P1 to P2 quantity rises from Q1 to Q2
Demand Increases
When: Buyers behavior changes ----demand shifts left old equilibrium is upset Creates a surplus ---price falls a new equilibrium is established price falls from p1 to p2 quantity falls from q1 to q2
Demand decreases
When: Sellers behavior changes ---supply shifts right old equilibrium is upset creates a surplus ---price falls a new equilibrium is established price falls from p1 to p2 quantity rises from q1 to q2
supply increases
When: sellers behavior changes ---supply shits left Old equilibrium is upset Creates a shortage ---price rises A new equilibrium is established Price rises from p1 to p2 Quantity falls from q1 to q2
supply decreases
When both demand and supply changes the equilibrium price and the equilibrium quantity but we need to know the realative magnitudes of the changes to predict some of the consequences.
A change in both demand and supply
Prices change when: only a market is in disequilibrium --shortage? price rises --surplus? price falls A shift in either demand or supply causes the price to change, but..
a price change does not cause
- –the demand curve to shift or
- –the supply curve to shift
