Unit 11

Question 1

Market equilibration

Answer 1

Shift in supply or diamond causes price to shift to reach new equilibriuum

Question 2

How does market equilibration work

Answer 2

Through rent seeking behaviour on the short side of the market if there’s excess supply or excess demand

Question 3

Short side with excess demand

Answer 3

Short side is supply

Question 4

Short side with excess supply

Answer 4

Short side is demand

Question 5

Market organisation

Answer 5

Relation ship between buyers and sellers determines the price

Question 6

Examples of markets

Answer 6

Face to face or auctioning

Question 7

Short run equilibrium

Answer 7

If economic profits can be realised on market then final equilibrium is not yet reached

Question 8

What occurs when positive economic rent in market

Answer 8

New firms enter the market

Question 9

Long run equilibrium

Answer 9

When no more economic rents can be earned

Question 10

In the long run what happens to quantities in the firms and markets

Answer 10

As price decreases - quantity sold in the market increases but the increase in firms means each firms makes less bread than before - increase in market supply

Question 11

Short run supply elasticity

Answer 11

Inelastic

Question 12

Long run supply elasticity

Answer 12

Elastic

Question 13

When scarcity increases what happens

Answer 13

Price increases and quantity decreases

Question 14

What happens when price is less than market clearing price

Answer 14

Secondary markets form

Question 15

Market clearing price =

Answer 15

Supply =demand

Question 16

What does price ceiling usually produce

Answer 16

Excess demand

Question 17

Price floor usually creates

Answer 17

Excess supply

Question 18

Stationary rent

Answer 18

Arise at equilibrium - consumer and producer surplus

Question 19

Dynamic equilibrium rent

Answer 19

Occur at disequilibrium - eliminated via rent seeking process