price determination Flashcards
1
Q
what is equilibrium
A
A market is at equilibrium when supply equals demand.
2
Q
what is excess supply
A
When the price is above the equilibrium price, the quantity supplied will exceed the quantity demanded leading to excess supply (or a surplus).
3
Q
what is excess demand
A
When the price is below the equilibrium price, the quantity demanded will exceed the quantity supplied, leading to excess demand (or a shortage).
4
Q
define price mechanism
A
The interaction of supply and demand to determine the price in a market.
5
Q
A
