Market Equilibrium (Edexcel A-Level Economics A): Flashcards
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Market equilibrium
Market equilibrium
When quantity demanded equals quantity supplied
Market 'clears' means
Market 'clears' means
No shortage or surplus; all buyers/sellers satisfied
Excess supply
Excess supply
Quantity supplied > quantity demanded (price too high)
Excess demand
Excess demand
Quantity demanded > quantity supplied (price too low)
Excess supply creates what price pressure?
Excess supply creates what price pressure?
Downward pressure on price
Excess demand creates what price pressure?
Excess demand creates what price pressure?
Upward pressure on price
Increase in demand leads to
Increase in demand leads to
Higher equilibrium price AND higher quantity
Increase in supply leads to
Increase in supply leads to
Lower equilibrium price BUT higher quantity
Price mechanism role
Price mechanism role
Signalling system that guides market to equilibrium
Substitutes
Substitutes
Goods that can be used in place of each other