Econ Chapter 6

ration

(a good) is to provide each individual with a fixed quantity

how prices reach equilibrium?

-when the market price is higher than the equilibrium price, there is excess supply and the market price falls. -when the market price is lower than the equilibrium price, there is excess demand and the market price rises

floor prices

a government-imposed limit below which prices cannot fall

price ceiling

a government-imposed limit on the highest price firms can charge in a market

surplus

exists when an excess supply persists for a significant period of time

sticky prices

prices that move to their equilibrium values very slowly

demand shifters

tastes income the prices of related goods (complements/substitutes) the number of buyers expexationsabout the future

supply shifters

the cost of inputs government policies the number of firms technology natural disasters and weather expectations about future prices

market equilibrium

the equilibrium point lies at the intersection of supply and demand (at that point, the quantity supplied equals the quantity demanded)

(market)equilibrium

the point at which the quantity supplied equals the quantity demanded

equilibrium price

the price that equates the quantity supplied and the quantity demanded

equilibrium quantity

the quantity that is supplied and demanded at the equilibrium price

shortage

this exissts when an excess demand for a prduct persists for a significant period of time

decrease in demand

when a demand curve shifts to the left, that shift is called

increase in demand

when a demand curve shifts to the right, that shift is called

decrease in supply

when a supply curve shifts to the left, the shift is called

incease in supply

when a supply curve shifts to the right, that shift is called

surplus (on a graph)

when price remains above the equilirium price for a significant period of time, there is a ____ equal to the horizontal distancebetween the quantity demanded and the quantity supplied

shortage (on a graph)

when price remains below the equilibrium price for a significant period of time, there is a shortage (the size of this can be found as the horizontal distance between the quantity supplied and the quantity demanded at the current prices)

excess supply (graph)

when the market price is above the equilibrium price, the quantity supplied exceeds the quantity demanded

excess demand (graph)

when the market price is below the equilibrium price, the quantity demanded exceeds the quantity supplied

excess demand

when the quantity demanded is larger than the quantity supplied, the difference between them is called

excess supply

when the quantity supplied is larger than the quantity demanded, the difference between them is called