Price Determination Flashcards
1
Q
Equilibrium price
A
The price at which there is no tendency to change because planned purchases are equal to planned sales
2
Q
Excess demand
A
Shortage - where demand is greater than supply
3
Q
Excess supply
A
Surplus - where supply is greater than demand
4
Q
Free market forces
A
Forces in free markets which act to reduce prices when there is excess supply and raise prices when there is excess demand
5
Q
Market clearing price
A
The price at which there is neither excess demand nor excess supply but where everything offered for sale is purchased
