The interaction of markets

Question 1

What is the market clearing price ?

Answer 1

At market equilibrium price has no tendency to change

Question 2

When does excess demand occur?

Answer 2

Below market equilibrium, demand greater than supply pushes prices up and causes firms to supply more and demand will contract

Question 3

When does excess supply occur?

Answer 3

When price is above p1, Surplus in quantity

Question 4

When are new market equilibriums formed ?

Answer 4

When the demand or supply curve shift due to pirates or pintswc

Question 5

what is market disequilibrium?

Answer 5

Internal or external forces prevent market equilibrium being reached, q demand either exceeds or falls short of the q supplied leading to shortage or surplus

Question 6

Impact of changes in demand/ supply

Answer 6

often markets are related so a change in demand or supply will influence another, Cocoa beans and chocolate, a shortage in both increase the prices

Question 7

Limitations and benefits of the supply demand model?

Answer 7

Consumers and producers don’t have perfect information, however the model is useful for competitive markets where there are many buyers and sellers