Market equilibrium

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10 Terms

1
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Definition of market

Any place where buyers meet supplies to exchange goods/services

2
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Definition of equilibrium

Where demand= supply in a market

3
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What is another name for market

Price mechanism

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What are the four functions of a price mechanism

ARSI

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What does A mean in ARSI (fourth step)

The market will Allocate scarce resources efficiently at equilibrium

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What does R mean in ARSI (third step)

Rations excess demand/supply

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What does S mean in ARSI (first step)

Signals that price is too high/low

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What does I mean in ARSI (second step)

Provides Incentives to producers to change prices and increase profit

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Free market economy definition

No intervention by government at all

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What is equilibrium?

The perfect allocation of scarce resources