Economics - Chapter 4

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  • Created by: sammilaw
  • Created on: 02-11-14 15:39
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  • CHAPTER 4: How a competitive market functions
    • Equilibrium - the price at which demand is equal to supply and there is no tendency for change
    • Disequilibrium - a situation within the market where supply does not equal demand
    • Excess supply - when supply at a particular price is greater than demand; should signal to producers to lower prices
    • Excess demand - when demand is greater than supply at a given price; should signal to increase prices
    • Market-clearing price - the price at which all goods supplied will be demanded
    • Maximum price - a price ceiling above which the price of a good/service is not allowed to increase
    • Minimum price - a price floor below which the price of a good/service is not allowed to decrease

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