Chapter 4 - Section 4 - Supply and Demand Together What is market equilibrium?
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11 Terms
What is market equilibrium?
The point where quantity demanded equals quantity supplied.
What is the equilibrium price?
The price at which quantity demanded equals quantity supplied.
What is the equilibrium quantity?
the quantity bought and sold at the equilibrium price.
What is a surplus?
A situation where quantity supplied exceeds quantity demanded.
What happens to prices during a surplus?
Prices tend to fall, increasing quantity demanded and decreasing quantity supplied until equilibrium is restored.
What is a shortage?
A situation where quantity demanded exceeds quantity supplied.
What happens to prices during a shortage?
Prices tend to rise, decreasing quantity demanded and increasing quantity supplied until equilibrium is restored.
What is the law of supply and demand?
The price of a good adjusts to balance quantity supplied and quantity demanded.
What are the three steps for analyzing changes in equilibrium?
1. Identify which curve shifts. 2. Determine the direction of the shift. 3. Use a supply-and-demand diagram to determine the effect on equilibrium price and quantity.
What is the difference between a shift in demand and a change in quantity demanded?
A change in demand shifts the entire demand curve. A change in quantity demanded is a movement along the same demand curve, caused by a change in the good's own price
What is the difference between a shift in supply and a change in quantity supplied?
A change in supply shifts the entire supply curve. A change in quantity supplied is a movement along the same supply curve, caused by a change in the good's own price.