Price Determination

Question 1

Equilibrium

Answer 1

Equilibrium means ‘at rest’ or ‘a state of balance’ - i.e. a situation where there is no tendency for change. The concept is used in both microeconomics (e.g. equilibrium prices in a market) and also in macroeconomics (e.g. equilibrium national income).

Question 2

Disequilibrium

Answer 2

Prices where demand and supply are out of balance are points of disequilibrium. There is either excess demand (market prices too low) or excess supply (market prices too high).

Question 3

Excess demand

Answer 3

A situation where quantity demanded is greater that quantity supplied.

Question 4

Excess supply

Answer 4

A situation where quantity supplied is greater than quantity demanded.

Question 5

Health rationing

Answer 5

Health rationing occurs when the demand for health care services outstrips the available resources leading to waiting lists and delays for health treatment.

Question 6

Shortage

Answer 6

A situation in which quantity demanded is greater than quantity supplied.