MICRO L4 - Equilibrium Flashcards
1
Q
there is excess demand when…
A
quantity demanded exceeds quantity supplied
2
Q
there is excess supply when…
A
quantity supplied exceeds quantity demanded
3
Q
when there is excess supply, prices are too…
A
- high
- sellers are frustrated as they cannot sell as much as they would like
- incentive to cut prices
4
Q
when there is excess demand, prices are too…
A
- low
- buyers are frustrated as they cannot buy as much as they would like
- incentive to raise prices
5
Q
what is consumer surplus
A
the difference between the price paid by consumers and the price that they are willing to pay.
6
Q
what is producer surplus
A
the difference between the price sold at by producers and the price that they are willing to sell at.
7
Q
3 roles of prices
A
- convey information
- ration scarce resources
- determine sellers income
