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Flashcards in Market Equilibrium & Policy Deck (21):
1

Equilibrium price

The price at which the quantity supplied of a good equals the demand.[Market clearing price]

2

Equilibrium quantity

The quantity traded when the quantity supplied of a good equals the demand.

3

Equilibrium (formula)

Quantity supplied (Qs) = Quantity demanded (Qd).

4

Shortage

A situation in which the quantity demanded is greater than supplied at current market price.

5

Shortage (Formula)

Qs- Qd

6

Surplus

A situation in which the quantity supplied is greater than the quantity demanded at the current market price.

7

Surplus (Formula)

Qd - Qs > 0

8

Non price determinant (demand)

A characteristic of demand for a good other than its own market price. Changes relationship between price and quantity. ( Increasing or Decreasing at EVERY price.)

9

Equilibrium (Formula)

Qs=Qd

10

Non price determinant (Supply)

A characteristic of the supply of a good other than its own market price. (Increase or Decrease quantity at EVERY price)

11

Change in supply

An increase or decrease in quantity supplied (increase or decrease Qty at EVERY price)

12

Change in supply ( Graphically represented)

A shift in the supply curve

13

Price ceiling

A maximum legal price at which a good can be sold.

14

nonbinding price ceiling

A maximum legal price that is set above the existing equilibrium price. ( because the ceiling is above the equilibrium price ,no effect)

15

Binding price ceiling

A maximum legal price set BELOW existing equilibrium price. (because the ceiling is below the equilibrium price it restricts trade)

16

Price Floor

A minimum legal price at which a good can be sold ( Minimum wage)

17

Non binding price floor

Set below Equilibrium price, no effect on market.

18

Binding price floor

A minimum legal price that is set above the existing equilibrium price. ( restricts trade)

19

Minimum Wage

The lowest wage firms can legally pay employees in the labor market.

20

Excise Tax

A tax based on # of units sold, NOT PRICE PAID.

21

Tax revenue (Formula)

TR= Tax x Qt