Economics, Lecture 3 - Markets in Action

Definitions provided

Market

any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged

How does an increase in demand affect the market equilibrium (think in terms of the directional shift in demand, increase/decrease in price and quantity)

Demand curve shifts right

Equilibrium Price increases

Equilibrium Quantity increases

How does a decrease in demand affect the market equilibrium (think in terms of the directional shift in demand, increase/decrease in price and quantity)

Demand curve shifts left

Equilibrium Price decreases

Equilibrium Quantity decreases

How does an increase in supply affect the market equilibrium (think in terms of the directional shift in demand, increase/decrease in price and quantity)

Supply curve shifts right

Equilibrium Price decreases

Equilibrium Quantity increases

How does a decrease in supply affect the market equilibrium (think in terms of the directional shift in demand, increase/decrease in price and quantity)

Supply curve shifts left

Equilibrium Price increases

Equilibrium Quantity decreases

Price ceiling

Set by the government in order to make goods affordable for the consumer

Price floor

Set by the government in order to ensure seller is paid adequately