Market Equilibrium Flashcards
(10 cards)
What happens at equilibrium?
Price and output are stable
Supply = Demand
How does a market move towards equilibrium?
Market Forces
What is disequilibrium?
Demand does not equal supply
What does the demand and supply model assume?
Supply and demand are independent
All markets are perfectly competitive
Where can the equilibrium be found?
Where demand = supply
How do market forces reduce excess supply?
Markets force the prices down, reducing the incentive to supply and increasing demand
What is excess supply?
When the quantity supplied is greater than the quantity demanded
How do market forces reduce excess demand?
Cause the price to go up to reduce demand and increase the incentive to supply
What is excess demand?
When demand for good is greater than supply
What are assumptions for demand and supply model?
Supply and demand are independent
All markers are perfectly competitive
Ceteris Paribus
