5. Market Equilibrium
Market equilibrium is achieved when the quantity demanded by consumers equals the quantity supplied by firms, resulting in a stable price and quantity in the market. Understanding the behavior of supply and demand helps in analyzing market shifts, which affect equilibrium price and quantity. The influence of government interventions, like price ceilings and floors, further illustrates the complexities of maintaining market balance.
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What we have learnt
- Equilibrium occurs at the intersection of demand and supply curves.
- Shifts in demand or supply influence the equilibrium price and quantity.
- Government interventions like price ceilings and floors can lead to excess demand or supply.
Key Concepts
- -- Equilibrium
- A state where market demand equals market supply, resulting in a stable market price.
- -- Excess Demand
- A situation where market demand exceeds market supply at a given price.
- -- Excess Supply
- A situation where market supply exceeds market demand at a given price.
- -- Price Ceiling
- A government-imposed maximum price that can be charged for a good to prevent prices from rising too high.
- -- Price Floor
- A government-imposed minimum price that can be charged for a good to ensure prices do not fall too low.
Additional Learning Materials
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