0
D. Equilibrium
When supply and demand are equal (i.e. when the supply function and demand function intersect) the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded. Thus, everyone (individuals, firms, or countries) is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.
As you can see on the chart, equilibrium occurs at the intersection of the demand and supply curve, which indicates no allocative inefficiency. At this point, the price of the goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium price and quantity.
In the real market place equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply.
Add your answer:
Earn +20 pts
How Excess demand and excess supply eliminated by market forces?
Excess demand is easily eliminated by market forces. If either the price or the supply goes up, demand will decrease exponentially.
What is the difference between excess demand and excess supply?
Excess demand (a seller's market) means the product is in short supply and prices will rise. Excess supply (buyer's market) means too much product as compared to demand and therefore prices will fall.
When the demand does not meet supply what is that called?
Overproduction or glut or excess supply or demand shortage
How do you response for excess demand and excess supply?
Increase the price
When does excess demand occur in the equilibrium price?
Excess demand occurs when demand outweighs supply. This means there is a shortage of a good.
How do you eliminate excess demand and excess supply in equilibrium?
Price is one way to eliminate excess demand and excess supply. Once prices start to rise, the amount of people purchasing or needing certain products go down.
What happens to the price when there is an excess supply of products?
The price goes down because of supply and demand.
Surplus is an excess of production or supply over demand. True or False?
True
When is there an equilibrium wage?
When there is no excess in demand for workers and in supply of workers (By Solomon Zelman)
If supply shifts to the right and demand remains constant?
When supply shifts to the right and demand remains constant then there will be an excess of product. Prices for the product will fall as well.
How the increase in expansion affect the demand?
Increase in expansion affect the demand because more supply/expansion with constant demand will lead to excess in expansion which affect the demand.
What is wrong when there is so much money in circulation?
The problem is that money is based on supply and demand principles. When you have too much supply it devalues the money. If there is excess supply it reduces demand. This usually results in inflation.
