Price determination

• What is the equilibrium price and quantity determined by?

  The interaction of supply and demand
• How is equilibrium price and quantity obtained?

  When the quantity supplied is equal to the quantity demanded
• When does equilibrium of price and quantity occur?

  When the quantity supplied is equal to the quantity demanded of a particular product
• What is excess demand?

  When the quantity demanded is more than the quantity supplied at the existing price
• What is excess supply?

  When the quantity demanded is less than the quantity supplied at the existing price
• When does excess demand occur?

  When the price is above the equilibrium price
• When does excess supply occur?

  When the price is below the equilibrium price
• What can changes in the equilibrium price be caused by?

  A change in the conditions of demand or supply
• How would an increase in demand affect the price equilibrium?

  There would be an increase in price and quantity, and as a result the demand curve would shift to the right
• How would a decrease in demand affect the price equilibrium?

  There would be a decrease in price and quantity, and as a result the demand curve would shift to the left
• How would an increase in supply affect the price equilibrium?

  There would be a decrease in price and an increase in quantity, and as a result the supply curve would shift to the right
• How would a decrease in supply affect the price equilibrium?

  There would be an increase in price and a decrease in quantity, and as a result the supply curve would shift to the left