Equilibrium Econ

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7 Terms

1
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Define equilibrium in a market.

The point where quantity supplied equals quantity demanded

2
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What is an equilibrium price?

The price at which the market is in balance — no shortage or surplus.

3
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Define shortage and surplus.

Shortage: Quantity demanded > Quantity supplied; pushes price upward. Surplus: Quantity supplied > Quantity demanded; pushes price downward.

4
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Effect of an increase in demand on equilibrium.

Increases both equilibrium price and quantity.

5
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Effect of a decrease in demand on equilibrium.

Decreases both equilibrium price and quantity.

6
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Effect of an increase in supply on equilibrium.

Decreases equilibrium price but increases equilibrium quantity.

7
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Effect of a decrease in supply on equilibrium.

Increases equilibrium price but decreases equilibrium quantity.