Ch7 - market equilibrium

• Equilibrium price

  Price at which supply and demand are equal
• Total revenue


  Amount of money generated from the sale of goods calculated by multiplying price by quantity
• Excess demand

  Demand is greater than supply and there are shortages in the market
• Excess supply


  Supply is greater than demand and there are unsold goods in the market
• Use of market forces to remove excess supply or demand

  1. If there is disequilibrium, producers could restore equilibrium by changing the price or adjusting supply

  2. If there is excess demand, producers could raise the price or employ more resources and increase supply

  3. If there is excess supply, producers could lower the price or store the excess supply and release it onto the market at a later date