Chapter 4 (ECON 1001)

Equilibrium

The point at which demand and supply are equal, resulting in no tendency for change in the market.

Equilibrium price

The price at which demand and supply are balanced in the market.

Equilibrium quantity

The quantity of a product that is demanded and supplied when the market is in equilibrium.

Planned economies

Economies where centralized decisions determine what, how, and for whom goods are produced.

Market economies

Economies where individuals make their own production and consumption decisions in markets.

Markets

Settings where potential buyers and sellers come together to exchange goods and services.

Shortage

Occurs when the quantity demanded exceeds the quantity supplied in the market.

Surplus

Occurs when the quantity supplied exceeds the quantity demanded in the market.

Increase in demand

Shifts the demand curve to the right, leading to higher prices and quantities in the market.

Decrease in demand

Shifts the demand curve to the left, resulting in lower prices and quantities in the market.

Increase in supply

Shifts the supply curve to the right, leading to lower prices and higher quantities in the market.

Decrease in supply

Shifts the supply curve to the left, resulting in higher prices and lower quantities in the market.

Big demand shift & Small supply shift

Both supply and demand curves shift left, causing prices to fall and a decrease in quantity.

Small demand shift & Big supply shift

Both supply and demand curves shift left, leading to rising prices and a decrease in quantity.