Equilibrium: Where Supply Meets Demand

Question 2

Centralized decisions are made about what is produced, how, by whom, and who gets what.

Answer 2

Planned Economy

Question 3

Each individual makes their own production and consumption decisions, buying and selling in markets.

Answer 3

Market Economy

Question 4

A setting bringing together potential buyers and sellers.

Answer 4

Market

Question 5

The point at which there is no tendency for change. A market is in equilibrium when the quantity supplied equals the quantity demanded.

Answer 5

Equilibrium

Question 6

The price at which the market is in equilibrium.

Answer 6

Equilibrium Price

Question 7

The quantity demanded and supplied in equilibrium.

Answer 7

Equilibrium Quantity

Question 8

When the quantity demanded exceeds the quantity supplied.

Answer 8

Shortage

Question 9

When the quantity demanded is less than the quantity supplied.

Answer 9

Surplus

Question 10

1. Income increases demand for normal goods and decreases demand for inferior goods
2. Preferences including advertising and social pressure
3. Prices of complements and substitutes
4. Expectations
5. Congestion and network effects 6. The type and number of buyers
   . . . but not a change in price

Answer 10

Factors that Shift Demand Curves

Question 11

1. Input prices
2. Productivity and technology
3. Other opportunities and the prices of
   related outputs
4. Expectations
5. The type and number of sellers
   . . . but not a change in price

Answer 11

Factors that Shift Supply Curves