Market Equilibrium and Disequilibrium Flashcards

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What is market equilibrium?

The point where quantity demanded equals quantity supplied.

What is the equilibrium price?

The price at which quantity demanded equals quantity supplied.

What is the equilibrium quantity?

The number of units bought and sold at the equilibrium price.

How do you find equilibrium on a demand and supply diagram?

Find where the demand and supply curves cross; read off that price and quantity.

What does market disequilibrium mean?

A situation where quantity demanded does not equal quantity supplied.

What is excess demand (a shortage), and when does it occur?

It is when quantity demanded is greater than quantity supplied at a price below the equilibrium price.

What is excess supply (a surplus), and when does it occur?

It is when quantity supplied is greater than quantity demanded at a price above the equilibrium price.

How can you work out the size of a shortage or surplus at a given price?

Take the difference between quantity demanded and quantity supplied at that price.

What is a market-clearing price?

Another name for the equilibrium price; at this price there is no shortage or surplus.

If demand increases (shifts right), what happens to equilibrium price and quantity?

Both the equilibrium price and the equilibrium quantity rise.

If supply increases (shifts right), what happens to equilibrium price and quantity?

The equilibrium price falls and the equilibrium quantity rises.

What does it mean that there is no tendency to change price at equilibrium?

At the equilibrium price, buyers want to buy exactly what sellers want to sell, so there is no pressure to change the price.