Th1.2: Excess Demand Flashcards
1
Q
When is there excess demand?
A
if price is set below equilibrium
2
Q
Refer to PP
Look at Graph 12. Why is there excess demand at P2?
A
the suppliers are willing to supply QS but consumers demand QD
3
Q
If firms increase their price, what will happen to demand?
A
it will contract
4
Q
Refer to PP
Look at Graph 12. How could the firm contract demand?
A
charging P1 for Q1
