MKTS AND EQUILIBRIUM

Question 1

MKT -

Answer 1

any place where buyers meet suppliers to exchange g/s

Question 2

MKT CAN BE

Answer 2

Physicall - matrekt shop online - amazon and ebay

Question 3

IN MKT HOW DO WE GET PRICE AND Q

Answer 3

DERIVED FROM EQUILIB

Question 4

IN EQUILIBRIUM..

Answer 4

D = S

Question 5

DEFINE EQUILIB

Answer 5

POINT WHERE MKT CLEARED FROM EXCESS DEMAND AND SUPLY

Question 6

EQUILIBRUM MKT PRICE AKA

Answer 6

CLEARING PRICE

Question 7

DISEQULIB
3 MKS

Answer 7

demand not = supply

Price above or below equilibrium

we see divergence between S &D

Question 8

DRAW MKT WITH EXCESS SUPPLY
3 mks

Answer 8

Price Above -
demand and supply not balance
Distance between a and b = excess supply

axis

Question 9

what is excess supply

Answer 9

• more supply than demand which isnt equilibrium

Question 10

what happens when theres a decrease in price

draw

Answer 10

thers disequilibrium

gap between supply and demand , excess demand - as d greater than supply

Question 11

In a free mkt why wont disequilibrium wont last a

Answer 11

mkt has 4 mechanisms that take away problems that exist in form of excess supply.demand

Question 12

state the way to rember mkt mechanism untions

Answer 12

ARSI

in the morning

Question 13

What does ARSI stand for

Answer 13

Allocation scarce resources efficiently by

Rationing excess demand and supply by

Signals to producers price too low/high +

incentives offered change prices and increase profit to producers

Question 14

Freemkt menas

Answer 14

• no intervention of gov - interaction of producers/consimers

Question 15

pneumonic to rember steps of mkt functions

Answer 15

SIRA

Question 16

Draw demand shift to right new equiib where d2 cits s1
Give reason why could happen PASIFIC

Question 17

EXPLAIN WHY A FREE MKT HIGHER PRICE OF P2 WONT LAST

Answer 17

Signla sent to producers that price is too high - excess stock in warehouses ,

Then mKT provides incentive for producers to change REDUCE price SO can sell excess supply/stock which they profit from

now theres contraction along supply curve and extension of demand bring us to p1 and q1

now we back at equilib as no excess supply or demand as we’ve rationed away excess

weve got perfect allocation of scarce resources , At p1 and q1 as we’re back at equilib and no excess

Question 18

draw + explain why free mkt lower price of P3 wont last

Answer 18

BELOW EQUILIB - excess demand

Singla sent that price too low - massive queues , showing excess dmnd and supply cant keep up

Incentive for producers to raise pice , satisfy excess demand at higher price to increase profits

We see extension of supply contraction of demand in which

we end up at p1 q1 equilib , so excess demand and supply ben rationed and got perfect allocation of resources

Question 19

when demand shifts it shifts @

Answer 19

same price

Question 20

WHEN EXPLAINING PROCESS EXPLAIN CURVE SHIFTS AT SAME PRICE THIS CREATES EXCESS UPPLY EQUIVALENT TO AB and continue due to x y z

DO SHIFT BACKWARDS AND FORWARD FOR BOTH S AND DEMAND

Answer 20

yes or nah

Question 21

if price below equilib =

Answer 21

excess demand

Question 22

if priec above equilib =

Answer 22

excess supply