Supply and Demand Equilibrium

These flashcards cover key vocabulary related to supply and demand equilibrium, including definitions of important economic terms.

Equilibrium

The balance point where the quantity demanded equals quantity supplied.

What is an example of equilibrium in a daily scenario?

In a grocery store, equilibrium occurs when the price of apples is set at a level where the number of apples that consumers want to buy equals the number of apples that the store has available. If the price is too high, there will be surplus apples; if too low, there will be

What does an equilibrium graph illustrate?

An equilibrium graph shows the point where the supply and demand curves intersect, indicating the market equilibrium price and quantity.

How do supply and demand curves correspond?

The demand curve slopes downward, indicating that lower prices lead to higher quantity demanded, while the supply curve slopes upward, showing that higher prices lead to greater quantity supplied. Their intersection marks market equilibrium.

How is government connected to equilibrium?

The government can influence market equilibrium through regulations such as price ceilings and price floors. Price ceilings limit how high prices can go, potentially causing shortages, while price floors prevent prices from falling too low, possibly leading to surpluses. These interventions can disrupt the natural equilibrium in a free market.

Disequilibrium

A condition where the quantity demanded does not equal the quantity supplied.

Excess Supply

Another term for surplus, indicating too much supply and not enough demand.

Surplus

A situation where quantity supplied exceeds quantity demanded, often occurring when the price is too high.

Shortage

A situation where quantity demanded exceeds quantity supplied, occurring when the price is too low.

Price Ceiling

The maximum legal price that can be charged for a good or service.

Price Floor

The minimum legal price that must be paid for a good or service.

Supply and Demand

Economic model determining the price of a good in a free market.

Excess Demand

Another term for shortage, indicating too much demand and not enough supply.

How do supply and demand curves correspond?

The demand curve slopes downward, indicating that lower prices lead to higher quantity demanded, while the supply curve slopes upward, showing that higher prices lead to greater quantity supplied. Their intersection marks market equilibrium.

Rent Control

A form of price ceiling that limits how much landlords can charge for rent.

Minimum Wage

A form of price floor setting the lowest amount employers can pay workers.