Market Equilibrium Flashcards
What is the equilibrium price and quantity?
The point where the quantity supplied equals the quantity demanded.
How can you indicate a surplus?
Prices above the equilibrium are a surplus.
How can you indicate a shortage?
Prices below the equilibrium are a shortage.
What is the rationing function of prices?
The ability of competitive forces of supply and demand to establish a price where buying and selling decisions are coordinated
Competitive markets generate __________ and __________ efficiency.
productive and allocative
What does it mean to generate productive and allocative efficiency?
The production of any particular good in the least costly way and producing the combination of goods most valued by society
Where is productive and allocative efficiency located in the graph?
At equilibrium price and quantity
