The determination of market equilibrium and market prices

Question 1

What is disequilibrium?

Answer 1

prices where demand and supply are out of balance

Question 2

what is equilibrium?

Answer 2

a state of equality or balance between market demand and supply. there is no excess demand or supply

Question 3

What will an outward shift of demand lead to?

Answer 3

a higher price, an expansion of production and a rise in total producer revenue

Question 4

What is the price mechanism SIR?

Answer 4

S- signalling function
I- incentive function
R- rationing

Question 5

What is consumer surplus?

Answer 5

the difference between what a consumer is willing to pay vs what they have to pay. measure of consumer welfare

Question 6

what is producer surplus?

Answer 6

the difference between the market price and the price at which they are will to supply. measure of producer welfare

Question 7

What is dead weight loss?

Answer 7

when some welfare is lost to the market due to not operating at the equilibrium

Question 8

What is total welfare?

Answer 8

consumer surplus + producer surplus

Question 9

What does an increase in demand do to the levels of consumer and producer surplus?

Answer 9

shifts demand outward
increase in consumer surplus
increase in producer surplus

Question 10

What does a decrease in supply do to the levels of consumer and producer surplus?

Answer 10

shifts supply inwards
decrease in consumer surplus
decrease in producer surplus