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Macro ch 4
Supply and Demand
| Term | Definition |
|---|---|
| Demand | The schedule of quantities of a good or service that people are willing and able to BUY at different prices. |
| Supply | The schedule of quantities of a good or service that people are willing and able to SELL at different prices. |
| Equilibrium price | The price at which quantity demanded equals quantity supplied. |
| Equilibrium quantity | The quantity bought and sold at the equilibrium price |
| Surplus Vs Shortage | Surplus- market price is above equilibrium price. Shortage- market price if below equilibrium price |
| An increase in demand leads to what? | An increase in both equilibrium price and quantity |
| A decrease in demand leads to what? | A decrease in both equilibrium price and quantity |
| An increase in supply... | Decreases equilibrium price and increases equilibrium quantity |
| A decrease in supply... | Increases equilibrium price and decreases equilibrium quantity |
| Price Floor | Government-imposed minimum price (including wages) |
| Price Ceiling | Government-imposed maximum legal price |
| 2 important price ceilings | 1) Rent Control and 2) Usury laws-ceiling on interest rates |
| Rationing | A system used to determine how a scarce good or service is distributed. |
Created by:
ltameirao
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