Market Equilibrium and Changes

A set of flashcards defining key concepts related to market equilibrium, shortages, surpluses, and market economies.

Equilibrium

The point where quantity supplied equals quantity demanded, resulting in no tendency for change.

Shortage

A situation where quantity demanded exceeds quantity supplied.

Surplus

A situation where quantity supplied exceeds quantity demanded.

Market Economy

An economy where individuals make their own production and consumption decisions.

Planned Economy

An economy where centralized decisions are made about production, distribution, and consumption.

Demand Shifters

Factors that can cause the demand curve to shift, such as income, preferences, and prices of related goods.

Supply Shifters

Factors that can cause the supply curve to shift, including input prices, technology, and number of sellers.

Law of Demand

As the price of a product falls, the quantity demanded rises, and vice versa.

Law of Supply

As the price of a product rises, the quantity supplied rises, and vice versa.

Market Adjustment Process

The process through which the market responds to changes in demand or supply until a new equilibrium is reached.