1. Supply & Demand work together to determine price
2. Equilibrium - where the supply and demand curve
intersect
a. quantity demanded equals
quantity supplied
b. the market is in at equilibrium
(at rest or in balance)
3. Equilibrium Price - price paid at equilibrium
4. Surplus - when quantity supplied is greater
than quantity demanded
a. occus when price is above
the equilibrium point
5. Shortage - when quantity demanded is greater
than quantity supplied
a. occurs when price is below
the equilibrium point
Changes in Equilibrium Price
1. Demand
a. increase in demand = increase
in equilibrium price
b. decrease in demand = decrease
in equilibrium price
2. Supply
a. increase in supply = decrease
in equilibrium price
b. decrease in supply = increase
in equilibrium price