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Class notes principle of macroeconomics (econ206) Exploring Macroeconomics, ISBN: 9780176877187
supply & demand terms
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equilibrium priceThe price at the intersection of the market supply curve and demand curve; at this price, the quantity
demanded equals the quantity supplied.
equilibrium quantity
The quantity at the intersection of the market supply and demand curves; at the equilibrium quantity,
the quantity demanded equals the quantity supplied.
surplus
A situation where quantity supplied exceeds quantity demanded.
Fix this by decreasing price and decreasing supply.
shortage
A situation where quantity demanded exceed quantity supplied.
Fix this by increase price and increasing supply.
market equilibrium
The point at which the market supply and market demand curves intersect.
price ceiling
A legally established maximum price.
Ex. rent control
If they are set below equilibrium, it causes a shortage.
price floor
A legally established minimum price.
Ex. minimum wage
If they are set above equilibrium, it causes a surplus.
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