Supply And Demand- Equilibrium Flashcards
1
Q
What is equilibrium??
A
A state of physical balance- a market is only at rest when supply = demand
2
Q
What causes a supply shortage and what happens as a result??
A
When price is too low, you have a supply shortage because quantity supplied is lower than the quantity demanded.
There is pressure for firms to increase price
3
Q
What causes a supply surplus and what happens as a result??
A
When price is too high and the demand for a product is lower than the supply of the product.
There is pressure for firms to decrease prices
