2.4 - Price

• Excess demand occurs when the price is set to a point where the demand for a product exceeds the available supply of a product

  
• Excess Supply occurs when the price is set to a point where the supply for a product exceeds the current demand of the product.

  
• Equilibrium occurs when the price is set to a point where the demand and supply are at the same level.
• 5 Characteristics of market forces:

  • Naturally moves market towards equilibrium
  • Signals sent
  • Incentive
  • Allocating Scarce Resources
  • Rationing excess