Market Equilibrium - Chapter 5

Vocabulary flashcards covering key concepts of market equilibrium, shortages/surpluses, price controls, and related tools from the notes.

Market equilibrium

The price-quantity combination at which the quantity demanded equals the quantity supplied; the intersection of the demand and supply curves.

Equilibrium price

The price at which quantity demanded equals quantity supplied (QD = QS).

Equilibrium quantity

The quantity demanded equals the quantity supplied at the equilibrium price.

Shortage

When quantity demanded exceeds quantity supplied (QD > QS) at the current price.

Surplus

When quantity supplied exceeds quantity demanded (QS > QD) at the current price.

Price ceiling

A government-imposed maximum price; a binding ceiling can create a shortage and artificial scarcity.

Price floor

A government-imposed minimum price; a binding floor can create a surplus and artificial excess supply.

Binding price control

A price control that prevents the market from reaching its natural equilibrium, leading to shortages or surpluses.