Microeconomics, Chapter 4, Market Equilibrium

Decrease in both demand and supply:

Decreases the equilibrium quantity. The change in the equilibrium price is ambiguous because the decrease in demand lowers the price, and the decrease in supply raises the price.

Markets are normally in

equilibrium

When there is a surplus, the price

falls

When there is an increase in both demand and supply:

increases the equilibrium quantity. The change in the equilibrium price is ambiguous because the increase in demand raises the price, and the increase in supply lowers the price.

Market equilibrium is at the

intersection of the demand curve and the supply curve.

When equilibrium is disturbed,

market forces restore it.

A market's automatic regulator is

price

Law of market forces

When there is a shortage, the price rises. When there is a surplus, the price falls.

Equilibrium price is the price at which

the quantity demanded equals the quantity supplied.

Market Equilibrium occurs when

the quantity demanded equals the quantity supplied.

Shortage

A situation in which the quantity demanded exceeds the quantity supplied.

Surplus

A situation in which the quantity supplied exceeds the quantity demanded.

Decrease in demand and increase in supply:

Lowers the equilibrium price. The change in the equilibrium quantity is ambiguous because the decrease in demand decreases the quantity and the increase in supply increases the quantity.

Increase in demand and decrease in supply:

Raises the equilibrium price. The change in the equilibrium quantity is ambiguous because the increase in demand increases the quantity and the decrease in supply decreases the quantity.

Equilibrium quantity changes in the ___________ direction to the change in supply

opposite

Equilibrium quantity is the

quantity bought and sold at the equilibrium price.

When there is a shortage, the price

rises

Equilibrium price changes in the ___________ direction as the change in supply

same

Price adjustments eliminate

shortages and surplusses