market equilibrium and disequilibrium Flashcards
1
Q
free market
A
a place where producers and consumers exchange goods and services, without government intervention
2
Q
market equilibrium vs disequilibrium
A
equilibrium: price mechanism, where price meets quanitity
disequilibrium: where price does not meet quantity
3
Q
what do prices do
A
-Allocate scarce resources efficiently
-Ration goods and services to prevent overconsumption/ overproduction
-signal excess supply/ demand to increase or decrease resources
-incentivise producers to increase or decrease production for profit motives
4
Q
excess demand vs excess supply
A
demand: prices rise as they are below equilibrium
supply: prices fall as they are above equilibrium
