click below
click below
Normal Size Small Size show me how
Unit 2-3
2-3 Equilibrium
Term | Definition |
---|---|
Equilibrium | The point at which quantity supplied and quantity demanded are equal |
Disequilbrium | Any price or quantity not at equilibrium. |
Excess Demand | When prices are set below equilibrium. Qd > Qs. This creates a shortage |
Excess Supply | When prices are set above equilibrium. Qs > Qd. This creates a surplus. |
Price Controls | Limits on prices set by the government on certain products. |
Price Floor | A price control that sets the lowest possible price for a good. Only effective if set above equilibrium. |
Price Ceiling | A price control that sets the highest possible price for a good. Only effective if set below equilibrium. |
Rent Control | A price ceiling placed on rent. |
Minimum Wage | A price floor set on hourly wage for labor. |
Surplus | Same as excess supply. Happens when prices are too high. |
Shortage. | Same as excess demand. Happens when prices are too low. |
Increase In Demand | Equilibrium price increases. Equilibrium Quantity increases. |
Decrease in Demand | Equilibrium price decreases. Equilibrium Quantity decreases |
Increase in Supply | Equilibrium price decreases. Equilibrium Quantity increases. |
Decrease in Supply | Equilibrium price increases. Equilibrium Quantity decreases. |