MICRO - Price Equilibrium Flashcards
(11 cards)
What is Market Equilibrium?
the point where demand = supply, meaning no surplus or shortage.
What is the equilibrium price?
The price at which buyers want to buy exactly the amount sellers want to sell.
Define market disequilibrium?
When demand != supply, causing excess demand (shortage) or excess supply (surplus).
Define price mechanism :
How prices allocate scarce resources in a free market economy.
What is rationing in economics?
When prices rise due to scarcity, reducing demand and spreading limited resources efficiently.
What is an incentive?
A reason to act - higher prices make firms increase supply, while lower prices encourage more demand.
Define signalling in the price mechanisms :
Price changes tell firms and consumers where resources are needed or when there’s excess supply.
What is market mechanism?
Resources are allocated through interactions between buyers and sellers, with no government control.
Define planned economy :
Resources are allocated by a government, not by market forces.
What is a mixed economy?
A system where both markets and governments allocate resources.
What is a command economy?
Where the government controls most economic controls most economic decisions - price, jobs, and production.
