a) equilibrium price and quantity

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9 Terms

1
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  • state what prices are determined by

  • the laws of supply and demand

2
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  • define market equilibrium

  • quantity demanded of a product = quantity supplied of a product

3
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  • define market disequilibrium

  • state what market disequilibrium causes

  • state what causes market disequilibrium

  • quantity demanded of a product =/= quantity supplied of a product

  • excess demand OR excess supply

  • price = below equilibrium price OR above equilibrium price

4
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  • define excess demand

  • state what causes excess demand

  • quantity demanded > quantity supplied

  • price = too low OR quantity demanded = too high

5
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  • define excess supply

  • state what causes excess supply

  • quantity supplied > quantity demanded

  • price = too high OR quantity demanded = too low

6
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  • describe how excess demand is represented on a supply and demand curve

  • price on the graph = lower than equilibrium price on the graph

  • excess demand = area below the supply and demand curve between price and equilibrium price

7
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  • describe how excess supply is represented on a supply and demand curve

  • price on the graph = higher than equilibrium price on the graph

  • excess demand = area above the supply and demand curve between price and equilibrium price

8
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  • explain how market forces eliminate excess demand

  • firms increase prices → contraction in the quantity demanded + extension in the quantity supplied → increase in revenue

9
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  • explain how market forces eliminate excess supply

  • firms decrease price → contraction in quantity supplied + extension in quantity demanded → increase in revenue