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9 Cards in this Set

  • Front
  • Back
Define equilibrium.
The price at which the quantity of a good demanded equals the quantity supplied in a given time period
Illustrate equilibrium using a graph.
What is surplus and how does it occur?
Surplus is when the market has an abundances of what is being supplied. It occurs when there is more being supplied than demanded.
What is the solution to surplus?
To decrease price in order to obtain an equilibrium.
What is shortage and how does it occur?
Shortage is when a market has a lack what is being supplied. It happens when demand out weighs what can be supplied.
Illustrate market shortage and surplus.
What is the solution to shortage?
The solution to a shortage is to raise the price therefore reducing the amount of demand an obtaining equilibrium again.
What is the effect of a price floor?
A price floor will decrease the quantity demanded, increase the quantity supplied and create a market surplus.
What is a price ceiling?
It is when the government sets how high a price can be charged for a certain resource. This causes an increase in demand, a decrease in supply and causes a market shortage.