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