Market Equilibrium Flashcards
1
Q
What is market equilibrium?
A
DEMAND AND SUPPLY INTERSECT
This establishes the equilibrium price and demand
2
Q
T/F: At equilibrium price there is neither a shortage nor a surplus?
A
TRUE
3
Q
What causes a shortage or surplus?
A
Market shortage- Actual price charged is less than equilibrium price
Market surplus- Actual price charged is MORE than the equilibrium price
4
Q
If demand only changes, what happens to the equilibrium?
A
Equilibrium quantity and price will change in the same direction as demand
5
Q
If supply only changes, what happens to the equilibrium?
A
Equilibrium quantity will change in the same direction as supply, but equilibrium price will change in the OPPOSITE DIRECTION
