interacton of markets

Question 1

market definition

Answer 1

where consumes meet suppliers to exchange goods and services

Question 2

market equilibrium

Answer 2

where supply equals demanded so the market is cleared, allocating the exact amount of gods/services to the exact amount of people who want them (allocative efficiency)

Question 3

market disequilibrium

Answer 3

excess supply/ demand when price is not at market clearing price

Question 4

if price is below MCP

Answer 4

there will be a shortage of supply and an excess of demad. prices must rise to reflect the high demand (value) of the good/service, causing a contractio in demand and an extension of supply to ration the good to those who need it most

Question 5

if price is above MCP

Answer 5

there will be an excess of supply and a shortage of demand. prices must fall to reflect the low demand (value) of the good/service, causing an extension of demand and a contraction of supply

Question 6

allocative efficiency

Answer 6

optimal distribution of goods and services considering consumer preferences