Market equilibrium Flashcards
What’s ‘Government intervention’?
Where the government becomes involved in a situation in order to help deal with a problem
What’s an ‘equilibrium price’?
It’s the price at which supply and demand are equal
What’s a ‘market-clearing price’?
It’s the price at which the amount supplied in a market matches exactly the amount demanded
What’s ‘total revenue’?
It’s the amount of money generated from the sale of goods calculated by multiplying price by quantity
What’s ‘excess demand’?
It’s where demand is greater than supply and there are shortages in the market
What’s ‘excess supply’?
It’s where supply is greater than demand and there are unsold goods in the market
What happens to the equilibrium price when demand increases?
When demand increases, the equilibrium price rises.
Describe how shifts in supply affect equilibrium price.
An increase in supply leads to a decrease in equilibrium price, while a decrease in supply leads to an increase in equilibrium price.
How can excess supply be resolved in a market?
Excess supply can be resolved by lowering the price or adjusting supply to match demand.
If the price charged in a market is below the equilibrium price, what is the likely outcome?
If the price is below equilibrium, there will be excess demand, leading to shortages in the market.
