T3 - Determinants of Equilibrium Prices Flashcards
What is a factor market
Where factors of production are bought and sold
What is a good market
Where products and services are bought and sold
What is market equilibrium
A point in which both consumers are happy to buy a product at a given price and firms are happy to sell a product at a given price
When can there be market disequilibrium
When there is -
Excess supply
Excess demand
What is excess supply
Quantitiy supplied > Quantity demanded
When will there be excess demand
When goods and servcies are under priced
When will there be excess supply
When goods and services are overpriced
What needs to happen when there is excess supply
Lower selling prices
What needs to happen when there is excess demand
Higher selling prices
What happens in goods market when there is excess demand
Market forces have to reconsider allocating resources to increase revenue
Prices rise
Some consumers may leave the market
Due to the rise in demand for a product a factor market is now in disequilibrium , what happens?
Deamd is dervied , so more workers are demadned at the wage level
Causing wages to rise
More people willing to work
Demand will fall due to high prices, back to equilibrium
What is the relationship between the factor and product market
Factor market is driven by the deamand in a current market
