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 = quantity supplied

3
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  • define market disequilibrium

  • state what causes market disequilibrium

  • state what market disequilibrium causes

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

  • price = below equilibrium price OR above equilibrium price

  • excess demand OR excess supply

4
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  • define excess demand

  • state what causes excess demand

  • quantity demanded > quantity supplied

  • price = below equilibrium price

5
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  • show excess demand on a graph

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6
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  • define excess supply

  • state what causes excess supply

  • quantity supplied > quantity demanded

  • price = too high

7
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  • show excess supply on a graph

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8
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  • explain how market forces eliminate excess demand

  • firms increase prices to increase profit

  • contraction in quantity demanded + extension in quantity supplied

9
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  • explain how market forces eliminate excess supply

  • firms decrease prices to increase profit

  • contraction in quantity supplied + extension in quantity demanded