Supply and Demand Flashcards
Surplus
The condition in which the quantity supplied of a good is greater than the quantity demanded. Surpluses occur only at prices. Above the equilibrium price.
Shortage
The condition in which the quantity demanded of a good is greater than the quantity supplied. Shortages occur only at prices below the equilibrium price.
Equilibrium
In a market, the point at which the quantity of a good that buyers are willing and able to buy is equal to the quantity that sellers are willing and able to produce and offer for sale (quantity demanded equals quantity supplied).
Equilibrium quantity
The quantity of a good that is bought and sold in a market that is in equillibrium
Equilibrium price
The price at which a good is bought and sold in a market that is in equilibrium
inventory
The stock goods that a business or store has on hand
price ceiling
A legislated price- set below the equilibrium price- above which buyers and sellers cannot legally buy and sell a good.
price floor
A legislated price- set above the equilibrium price- below which buyers and sellers cannot legally buy and sell a good
What causes equilibrium prices to change?
Either supply or demand has to change
An increase in demand does what to the equilibrium price?
a rise
A decrease in demand which does what to the equilibrium price
a fall
A decrease in supply which does what to the equilibrium price
rise
A increase in supply which does what to the equilibrium price
fall
Price Ceiling effect
creates shortage
Price Floor effect
creates a surplus
