Market Disequilibrium and Changes in Equilibrium - AP Microeconomics
- What is the effect of a decrease in demand on equilibrium quantity?
- Equilibrium quantity decreases. Lower demand shifts curve left, reducing equilibrium quantity.
- What is market disequilibrium?
- A mismatch between quantity supplied and quantity demanded. This occurs when markets are not in balance at current prices.
- Identify the effect of an increase in input prices on supply.
- Supply decreases. Higher production costs shift supply curve leftward.
- Find the new equilibrium: Demand decreases; supply remains constant.
- Price decreases; quantity decreases. Leftward demand shift decreases both price and quantity.
- Identify the effect of a government-imposed quota on equilibrium.
- Limits quantity, raises price. Artificial restriction creates scarcity and higher prices.
- Calculate the shortage: Quantity demanded 100, quantity supplied 70.
- Shortage of 30 units. Shortage equals quantity demanded minus quantity supplied.
- What happens to equilibrium when both supply and demand increase?
- Quantity increases; price is indeterminate. Rightward shifts in both curves increase quantity traded.
- How does a decrease in consumer income affect demand for normal goods?
- Demand decreases. Lower income reduces purchasing power for normal goods.
- What happens when a price floor is set above the equilibrium price?
- It causes a surplus. Quantity supplied exceeds quantity demanded at the floor price.
- Identify the effect of a subsidy on supply.
- Supply increases. Government payment lowers producers' costs, increasing supply.
- What is the impact of expectations of future price increases on current demand?
- Current demand increases. Consumers buy more today to avoid higher future prices.
- Find the new equilibrium: Supply increases; demand remains constant.
- Price decreases; quantity increases. Rightward supply shift decreases price but increases quantity.
- Calculate the surplus: Quantity supplied 150, quantity demanded 120.
- Surplus of 30 units. Surplus equals quantity supplied minus quantity demanded.
- What is the impact of a simultaneous decrease in supply and demand?
- Quantity decreases; price is indeterminate. Price depends on relative magnitude of supply and demand changes.
- What is the role of prices in a market economy?
- Signals for resource allocation and rationing mechanism. Prices coordinate economic activity and distribute scarce resources.
- What is the impact of a simultaneous increase in supply and demand?
- Quantity increases; price is indeterminate. Price depends on relative magnitude of supply and demand changes.
- Identify the effect of an excise tax on supply.
- Supply decreases. Tax increases producers' costs, shifting supply curve leftward.
- What is the effect of a natural disaster on supply?
- Supply decreases. Disasters reduce production capacity, shifting supply leftward.
- What happens to equilibrium price if demand increases more than supply?
- Price increases. Demand increase dominates, creating net upward price pressure.
- Find the new equilibrium: Demand increases; supply remains constant.
- Price increases; quantity increases. Rightward demand shift increases both price and quantity.
- What is the equilibrium price?
- The price at which quantity demanded equals quantity supplied. Market clearing price where supply and demand curves intersect.
- Identify the effect of technological advancement on supply.
- Supply increases. Lower production costs shift supply curve rightward.
- Identify the effect of an increase in supply on equilibrium price.
- Equilibrium price decreases. Higher supply shifts curve right, lowering equilibrium price.
- What is the impact of expectations of future price decreases on current supply?
- Current supply decreases. Producers sell more today before prices fall further.
- State the law of supply and demand.
- Price adjusts to bring quantity supplied and demanded into balance. Market forces naturally move toward equilibrium through price changes.
- How does a decrease in consumer income affect demand for inferior goods?
- Demand increases. Lower income increases demand for cheaper substitute goods.
- What is a price ceiling?
- A legal maximum price set below equilibrium. Government intervention preventing market price from rising.
- Identify the effect of a decrease in input prices on supply.
- Supply increases. Lower production costs shift supply curve rightward.
- What is producer surplus?
- Difference between what producers receive and the minimum they would accept. Area above supply curve and below market price.
- What is consumer surplus?
- Difference between what consumers are willing to pay and what they actually pay. Area below demand curve and above market price.
- What happens when a price ceiling is set below the equilibrium price?
- It causes a shortage. Quantity demanded exceeds quantity supplied at the ceiling price.
- Identify the result of excess demand in a market.
- Price tends to increase. Excess demand creates upward pressure on price through bidding.
- Find the new equilibrium: Supply decreases; demand remains constant.
- Price increases; quantity decreases. Leftward supply shift increases price but decreases quantity.
- What happens to equilibrium price if supply increases more than demand?
- Price decreases. Supply increase dominates, creating net downward price pressure.
- Identify the effect of an increase in demand on equilibrium price.
- Equilibrium price increases. Higher demand shifts curve right, raising equilibrium price.
- What is a price floor?
- A legal minimum price set above equilibrium. Government intervention preventing market price from falling.
- How does a government-imposed subsidy affect equilibrium?
- Increases supply, lowers price, increases quantity. Subsidies reduce producer costs, shifting supply rightward.
- Identify the result of excess supply in a market.
- Price tends to decrease. Excess supply creates downward pressure on price through competition.
- What happens to equilibrium when both supply and demand decrease?
- Quantity decreases; price is indeterminate. Leftward shifts in both curves reduce quantity traded.
- What is the effect of a decrease in supply on equilibrium quantity?
- Equilibrium quantity decreases. Lower supply shifts curve left, reducing equilibrium quantity.