Podcast
Questions and Answers
What is market equilibrium?
What is market equilibrium?
- An unstable market condition
- When supply exceeds demand
- When supply and demand are balanced in a market (correct)
- When demand exceeds supply
What is the equilibrium price?
What is the equilibrium price?
The exact price where the market is at equilibrium.
What two things can happen when there is disequilibrium?
What two things can happen when there is disequilibrium?
Shortage and surplus.
What is a price ceiling?
What is a price ceiling?
What is a price floor?
What is a price floor?
How can improvements in technology increase supply?
How can improvements in technology increase supply?
What market condition occurs with a positive shift in the demand curve but unchanged supply curve?
What market condition occurs with a positive shift in the demand curve but unchanged supply curve?
Why can't producers increase supply with a sudden increase in demand?
Why can't producers increase supply with a sudden increase in demand?
What is a fad?
What is a fad?
What is a supply shock?
What is a supply shock?
What does efficient resource allocation mean?
What does efficient resource allocation mean?
How can rent control lead to a shortage of housing?
How can rent control lead to a shortage of housing?
How does raising the minimum wage sometimes increase poverty?
How does raising the minimum wage sometimes increase poverty?
What occurs when demand goes down and supply goes up?
What occurs when demand goes down and supply goes up?
Why can't producers increase supply to meet new demand without raising the price?
Why can't producers increase supply to meet new demand without raising the price?
What kind of disequilibrium occurs if the price level remains at point B?
What kind of disequilibrium occurs if the price level remains at point B?
What would improvements in technology cause the supply curve to do?
What would improvements in technology cause the supply curve to do?
What type of disequilibrium occurs if producers offered a product at point B?
What type of disequilibrium occurs if producers offered a product at point B?
What is disequilibrium?
What is disequilibrium?
What is shortage?
What is shortage?
What is surplus?
What is surplus?
What does an increase or decrease in supply create?
What does an increase or decrease in supply create?
What is inventory?
What is inventory?
What are search costs?
What are search costs?
What happens to shortages when demand decreases?
What happens to shortages when demand decreases?
What can lead to a sudden shortage of a good?
What can lead to a sudden shortage of a good?
What is rationing?
What is rationing?
What is imperfect competition?
What is imperfect competition?
What are negative externalities?
What are negative externalities?
What is imperfect information?
What is imperfect information?
What role does price serve as an incentive?
What role does price serve as an incentive?
How do prices act as signals?
How do prices act as signals?
What is flexibility in terms of prices?
What is flexibility in terms of prices?
Study Notes
Market Dynamics
- Market equilibrium is achieved when supply and demand are balanced.
- Equilibrium price is where consumer willingness to pay meets producer minimum cost.
- Disequilibrium can lead to shortage (demand exceeds supply) or surplus (supply exceeds demand).
Price Controls
- Price ceiling is the maximum legal price, commonly seen in rent controls.
- Price floor is the minimum legal price, often associated with minimum wage.
Supply and Demand Shifts
- Improvement in technology increases supply by making production more efficient.
- A positive shift in the demand curve while supply remains constant results in a shortage.
- Producers must increase prices to cover costs when demand surges.
Market Phenomena
- Fads cause sudden, temporary increases in demand for products.
- Supply shocks drastically change the equilibrium price due to unexpected supply fluctuations.
Resource Allocation
- Efficient resource allocation occurs as producers satisfy consumer demand through profit incentives.
- Rent controls intended to make housing affordable can ironically create shortages by decreasing supply.
Labor Market
- Raising minimum wage to reduce poverty can lead to increased labor costs, reducing demand for workers.
- Surpluses in the market can occur when goods are priced too high relative to demand.
Economic Concepts
- Shortage occurs when quantity demanded exceeds quantity supplied.
- Surplus arises when quantity supplied surpasses quantity demanded.
- Changes in supply or demand shift the equilibrium point in a market.
Inventory and Costs
- Inventory refers to the amount of goods a firm has available for sale.
- Search costs represent both financial and opportunity costs incurred by consumers seeking goods or services.
Demand Shifts
- Decreases in demand can turn shortages into surpluses, shifting the demand curve leftward.
- Rationing is the process of distributing scarce resources based on criteria other than price.
Market Inefficiencies
- Imperfect competition affects prices and consumer decisions.
- Negative externalities impact individuals who don't control production or consumption levels.
- Imperfect information can lead consumers to make poor choices due to lack of knowledge.
Pricing Mechanisms
- Prices serve as incentives, guiding buyers and sellers about product availability.
- High prices signal to producers to increase production, while low prices indicate overproduction.
- Price flexibility allows for quick adjustments to alleviate shortages or surpluses effectively.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge with these flashcards based on Economics Chapter 6. Topics covered include market equilibrium, equilibrium price, and the effects of disequilibrium. Perfect for review and reinforcement of key concepts in economics.
