Market This is where buyers and sellers meet to exchange goods and services
Free Market Economy - Also known as capitalism.
Free Market Economy - Adopts a laissez-faire approach with limited government intervention.
Free Market Economy - Economic players are driven by self-interest.
Free Market Economy - Also known as socialism or communism.
Qd is for quantity demanded
a is for other non-price factors
b is for the slope of the demand curve
P is for price
Quantity Demanded is the number of units that a buyer is willing to purchase at any given price.
Quantity Demanded - Formula: Qd = a - b(P)
Effective demand depends on 1. desire 2. means to purchase 3. willingness to use those means for that purchase.
Quantity Supplied is the number of units that a seller is willing to produce at any given price.
Quantity Supplied - Formula: Qs = a + b(P)
Determinants of Supply 1. Technology 2. Number of Sellers 3. Cost of Production 4. Taxes and Subsidies 5. Expectations 6. Weather
MARKET EQUILIBRIUM (Qd = Qs) Is the state of balance, when the quantity demanded (Qd), is equal to the quantity supplied (Qs).
The equilibrium quantity is the quantity demanded and the quantity supplied at equilibrium.
The equilibrium price (also marketing clearing price) is the price where Qd = Qs.
Demand Curve As the price of goods and services increases, the quantity demanded decreases.
Supply Curve As the price of goods and services increases, the quantity supplied also increases.
Market equilibrium exists at the point where demand and supply curves intersect.
Market Disequilibrium (Qd ≠ Qs) Pertains to the state of imbalance where the quantity demanded (Qd) is equal to the quantity supplied (Qs)
Shortage (Qd > Qs) excess demand in the market quantity demanded is greater than the quantity supplied. The price falls below the equilibrium price.
Factors Affecting Shortage a) increase in demand for goods and services b) decrease in the supply of goods and services c) government interventions such as imposing price ceilings
Surplus (Qd < Qs) excess supply in the market. quantity supplied less than quantity demanded. price is shown above equilibrium price.
Factors Affecting Surplus a) increase in supply of goods and services b) decrease in demand for goods and services c) government interventions such as imposing price floor