Chapter 5: Bringing demand and supply together in a competitive market

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  • Created by: Asiyah N
  • Created on: 05-08-16 17:23
Competitive market
A market in which the large number of buyers and sellers possess good market information and easily enter or leave the market
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Equilibrium
A state of rest or balance between opposing forces
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Market equilibrium
When planned demand equals planned supply in the market
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Excess supply
When firms wish to sell more than consumers wish to buy, with the price above equilibrium price
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Market disequilibrium
When the market fails to clear. The market plans of consumers and firms are inconsistent with each other
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Excess demand
When consumers wish to buy more than firms wish to sell, with the price below the equilibrium price
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Incentive function
Prices create incentives for consumers and firms to behave in certain ways
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Rationing or allocative function
Prices allocate scarce resources between competing users
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Signalling function
Prices provide information to buyers and sellers
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Other cards in this set

Card 2

Front

A state of rest or balance between opposing forces

Back

Equilibrium

Card 3

Front

When planned demand equals planned supply in the market

Back

Preview of the back of card 3

Card 4

Front

When firms wish to sell more than consumers wish to buy, with the price above equilibrium price

Back

Preview of the back of card 4

Card 5

Front

When the market fails to clear. The market plans of consumers and firms are inconsistent with each other

Back

Preview of the back of card 5
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