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9 Cards in this Set
- Front
- Back
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Define equilibrium. |
The price at which the quantity of a good demanded equals the quantity supplied in a given time period
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Illustrate equilibrium using a graph.
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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.
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What is the solution to surplus? |
To decrease price in order to obtain an equilibrium.
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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.
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Illustrate market shortage and surplus.
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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.
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What is the effect of a price floor?
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A price floor will decrease the quantity demanded, increase the quantity supplied and create a market surplus.
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What is a price ceiling?
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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.
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