Chapter 2.2 - 2.3: The Market Mechanism and Changes in Market Equilibrium
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9 Terms
Equilibrium
the price that equates the quantity supplied to the quantity demanded
Market Mechanism
tendency in a free market for price to change until the market clears
Surplus
situation in which the quantity supplied exceeds the quantity demanded.
Shortage
situation in which the quantity demanded exceeds the quantity supplied. This leads to upward pressure on prices as consumers compete for the limited goods available.
Supply Shift to the right (increase)
equilibrium price decreases while equilibrium quantity increases.
Demand shift to the right (increase)
equilibrium price increases while equilibrium quantity increases.
Supply shift to the left (decrease)
equilibrium price increases while equilibrium quantity decreases.
Demand shift to left (decrease)
equilibrium price decreases while equilibrium quantity decreases.
Relative Magnitude
Predictions depend on this
refers to the comparison of the size or strength of shifts in demand and supply, influencing the overall change in equilibrium price and quantity.
Note 
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