AP Macroeconomics Flashcards: Market Equilibrium And Disequilibrium

What this deck covers

This deck focuses on Market Equilibrium And Disequilibrium, giving you a quick way to review the definitions, rules, and examples that matter most for AP Macroeconomics.

How to use these flashcards

Work through these flashcards in short sessions. Try to answer each prompt before flipping the card, then revisit any cards you miss until the explanation feels automatic.

Flashcard 1: What is the result of an increase in income for an inferior good?

Answer: Decreases demand, lowering both equilibrium price and quantity. Higher income decreases demand for inferior goods.

Flashcard 2: What is deadweight loss in market terms?

Answer: The loss of economic efficiency when equilibrium is not achieved. Results from market intervention preventing efficient allocation.

Flashcard 3: What is a price ceiling?

Answer: A legal maximum price that can be charged for a good or service. Government-imposed upper limit on prices.

Flashcard 4: What is the equilibrium price?

Answer: It is the price at which quantity demanded equals quantity supplied. The market-clearing price where curves intersect.

Flashcard 5: What is the effect of a government-imposed rent control below equilibrium?

Answer: Creates a housing shortage. Price ceiling below equilibrium creates excess housing demand.

Flashcard 6: Define disequilibrium in a market.

Answer: Disequilibrium occurs when quantity supplied does not equal quantity demanded. Markets are unstable when $Q_d \neq Q_s$.

Flashcard 7: What results from increased producer expectations of future prices?

Answer: Decrease in current supply, raising price and lowering quantity. Anticipated price increases shift current supply leftward.

Flashcard 8: What is market equilibrium?

Answer: Market equilibrium is when quantity demanded equals quantity supplied. The market clearing point where there's no excess supply or demand.

Flashcard 9: What results from increased consumer expectations of future prices?

Answer: Increase in current demand, raising price and quantity. Anticipated price increases shift current demand rightward.

Flashcard 10: What is the role of prices in a market system?

Answer: Prices allocate resources and signal information to buyers and sellers. Price mechanism coordinates economic activity efficiently.

Flashcard 11: What occurs in a market with excess demand?

Answer: Excess demand leads to a shortage, causing upward pressure on price. Consumers bid up prices when goods are scarce.

Flashcard 12: What is the impact of a subsidy on market equilibrium?

Answer: A subsidy lowers the equilibrium price and increases quantity. Government payment to producers shifts supply rightward.

Flashcard 13: Define producer surplus at market equilibrium.

Answer: The difference between the price producers receive and the minimum they would accept. Area above supply curve and below market price.

Flashcard 14: What results from increased consumer expectations of future prices?

Answer: Increase in current demand, raising price and quantity. Anticipated price increases shift current demand rightward.

Flashcard 15: What results from an increase in supply with demand constant?

Answer: A decrease in equilibrium price and an increase in quantity. Rightward supply shift benefits consumers with lower prices.

Flashcard 16: What effect does a decrease in the price of a complement have on demand?

Answer: Increases demand for the original good, raising price and quantity. Cheaper complements increase demand for original good.

Flashcard 17: What is deadweight loss in market terms?

Answer: The loss of economic efficiency when equilibrium is not achieved. Results from market intervention preventing efficient allocation.

Flashcard 18: What is the effect of a government-imposed minimum wage above equilibrium?

Answer: Creates a surplus of labor, resulting in unemployment. Price floor above equilibrium creates excess labor supply.

Flashcard 19: What is a price floor?

Answer: A legal minimum price that must be paid for a good or service. Government-imposed lower limit on prices.

Flashcard 20: Define producer surplus at market equilibrium.

Answer: The difference between the price producers receive and the minimum they would accept. Area above supply curve and below market price.

Flashcard 21: What is the equilibrium quantity?

Answer: It is the quantity exchanged at the equilibrium price. The amount traded when market clears.

Flashcard 22: What is a surplus in terms of market equilibrium?

Answer: A surplus is when quantity supplied exceeds quantity demanded. Occurs above equilibrium price level.

Flashcard 23: How does the imposition of tariffs affect market equilibrium?

Answer: Raises prices and reduces quantity of imported goods. Import tax artificially reduces foreign competition.

Flashcard 24: How does an increase in demand affect the market equilibrium?

Answer: Increases both equilibrium price and quantity. Rightward demand shift raises both market variables.

Flashcard 25: What is a shortage in terms of market equilibrium?

Answer: A shortage is when quantity demanded exceeds quantity supplied. Occurs below equilibrium price level.

Flashcard 26: How does an import quota affect market equilibrium?

Answer: Reduces supply, increases price, and decreases quantity. Trade restriction artificially limits supply.

Flashcard 27: What is the impact of a tax on market equilibrium?

Answer: A tax raises the equilibrium price and decreases quantity. Government levy on transactions shifts supply leftward.

Flashcard 28: How does an import quota affect market equilibrium?

Answer: Reduces supply, increases price, and decreases quantity. Trade restriction artificially limits supply.

Flashcard 29: How does the imposition of tariffs affect market equilibrium?

Answer: Raises prices and reduces quantity of imported goods. Import tax artificially reduces foreign competition.

Flashcard 30: What happens if both demand and supply increase simultaneously?

Answer: Equilibrium quantity increases; price effect is indeterminate. Price depends on relative magnitudes of shifts.

Flashcard 31: How does an improvement in consumer preferences affect demand?

Answer: Increases demand, leading to higher equilibrium price and quantity. Taste changes shift demand curve rightward.

Flashcard 32: What is the equilibrium quantity?

Answer: It is the quantity exchanged at the equilibrium price. The amount traded when market clears.

Flashcard 33: What is a price floor?

Answer: A legal minimum price that must be paid for a good or service. Government-imposed lower limit on prices.

Flashcard 34: What happens if both demand and supply decrease simultaneously?

Answer: Equilibrium quantity decreases; price effect is indeterminate. Price depends on relative magnitudes of shifts.

Flashcard 35: What is market equilibrium?

Answer: Market equilibrium is when quantity demanded equals quantity supplied. The market clearing point where there's no excess supply or demand.

Flashcard 36: How does an improvement in consumer preferences affect demand?

Answer: Increases demand, leading to higher equilibrium price and quantity. Taste changes shift demand curve rightward.

Flashcard 37: State the law of supply and demand.

Answer: Price adjusts to bring supply and demand into balance. Market forces automatically correct imbalances through price changes.

Flashcard 38: What is the effect of a government-imposed minimum wage above equilibrium?

Answer: Creates a surplus of labor, resulting in unemployment. Price floor above equilibrium creates excess labor supply.

Flashcard 39: What is the role of prices in a market system?

Answer: Prices allocate resources and signal information to buyers and sellers. Price mechanism coordinates economic activity efficiently.

Flashcard 40: How does a decrease in production costs affect supply?

Answer: Increases supply, lowering equilibrium price and increasing quantity. Reduced input costs shift supply curve rightward.

Flashcard 41: What is a shortage in terms of market equilibrium?

Answer: A shortage is when quantity demanded exceeds quantity supplied. Occurs below equilibrium price level.

Flashcard 42: State the law of supply and demand.

Answer: Price adjusts to bring supply and demand into balance. Market forces automatically correct imbalances through price changes.

Flashcard 43: What happens if both demand and supply decrease simultaneously?

Answer: Equilibrium quantity decreases; price effect is indeterminate. Price depends on relative magnitudes of shifts.

Flashcard 44: What is the impact of a tax on market equilibrium?

Answer: A tax raises the equilibrium price and decreases quantity. Government levy on transactions shifts supply leftward.

Flashcard 45: Identify the effect of a price ceiling below equilibrium price.

Answer: Creates a shortage as quantity demanded exceeds quantity supplied. Artificial price cap prevents market clearing.

Flashcard 46: Define disequilibrium in a market.

Answer: Disequilibrium occurs when quantity supplied does not equal quantity demanded. Markets are unstable when $Q_d \neq Q_s$.

Flashcard 47: What happens when there is excess supply in a market?

Answer: Excess supply leads to a surplus, causing downward pressure on price. Producers compete by lowering prices to sell excess inventory.

Flashcard 48: What effect does a decrease in the price of a complement have on demand?

Answer: Increases demand for the original good, raising price and quantity. Cheaper complements increase demand for original good.

Flashcard 49: Identify the effect of a price floor above equilibrium price.

Answer: Creates a surplus as quantity supplied exceeds quantity demanded. Artificial price support prevents market clearing.

Flashcard 50: What is a price ceiling?

Answer: A legal maximum price that can be charged for a good or service. Government-imposed upper limit on prices.

Flashcard 51: What is the effect of a government-imposed rent control below equilibrium?

Answer: Creates a housing shortage. Price ceiling below equilibrium creates excess housing demand.

Flashcard 52: What occurs in a market with excess demand?

Answer: Excess demand leads to a shortage, causing upward pressure on price. Consumers bid up prices when goods are scarce.

Flashcard 53: How does a technological advancement affect supply?

Answer: Increases supply, lowering equilibrium price and increasing quantity. Lower production costs shift supply curve rightward.

Flashcard 54: What effect does a decrease in the price of a substitute have on demand?

Answer: Decreases demand for the original good, lowering price and quantity. Cheaper substitutes reduce demand for original good.

Flashcard 55: What effect does a decrease in the price of a substitute have on demand?

Answer: Decreases demand for the original good, lowering price and quantity. Cheaper substitutes reduce demand for original good.

Flashcard 56: How does a technological advancement affect supply?

Answer: Increases supply, lowering equilibrium price and increasing quantity. Lower production costs shift supply curve rightward.

Flashcard 57: How does a decrease in supply affect the market equilibrium?

Answer: Increases equilibrium price and decreases quantity. Leftward supply shift harms consumers with higher prices.

Flashcard 58: What results from an increase in supply with demand constant?

Answer: A decrease in equilibrium price and an increase in quantity. Rightward supply shift benefits consumers with lower prices.

Flashcard 59: What results from a decrease in demand with supply constant?

Answer: A decrease in equilibrium price and quantity. Leftward demand shift reduces both market variables.

Flashcard 60: What is a surplus in terms of market equilibrium?

Answer: A surplus is when quantity supplied exceeds quantity demanded. Occurs above equilibrium price level.

Flashcard 61: Define consumer surplus at market equilibrium.

Answer: The difference between what consumers are willing to pay and what they actually pay. Area below demand curve and above market price.

Flashcard 62: What is the effect of an excise tax on producers?

Answer: Shifts supply curve leftward, increasing price and lowering quantity. Per-unit tax reduces supply by increasing production costs.

Flashcard 63: Identify the effect of a price ceiling below equilibrium price.

Answer: Creates a shortage as quantity demanded exceeds quantity supplied. Artificial price cap prevents market clearing.

Flashcard 64: What happens when there is excess supply in a market?

Answer: Excess supply leads to a surplus, causing downward pressure on price. Producers compete by lowering prices to sell excess inventory.

Flashcard 65: Define consumer surplus at market equilibrium.

Answer: The difference between what consumers are willing to pay and what they actually pay. Area below demand curve and above market price.

Flashcard 66: How does an increase in demand affect the market equilibrium?

Answer: Increases both equilibrium price and quantity. Rightward demand shift raises both market variables.

Flashcard 67: What results from a decrease in demand with supply constant?

Answer: A decrease in equilibrium price and quantity. Leftward demand shift reduces both market variables.

Flashcard 68: What results from increased producer expectations of future prices?

Answer: Decrease in current supply, raising price and lowering quantity. Anticipated price increases shift current supply leftward.

Flashcard 69: How does a decrease in production costs affect supply?

Answer: Increases supply, lowering equilibrium price and increasing quantity. Reduced input costs shift supply curve rightward.

Flashcard 70: How does a decrease in supply affect the market equilibrium?

Answer: Increases equilibrium price and decreases quantity. Leftward supply shift harms consumers with higher prices.

Flashcard 71: What is the result of an increase in income for a normal good?

Answer: Increases demand, raising both equilibrium price and quantity. Higher income increases demand for normal goods.

Flashcard 72: What is the equilibrium price?

Answer: It is the price at which quantity demanded equals quantity supplied. The market-clearing price where curves intersect.

Flashcard 73: Identify the effect of a price floor above equilibrium price.

Answer: Creates a surplus as quantity supplied exceeds quantity demanded. Artificial price support prevents market clearing.

Flashcard 74: What is the impact of a subsidy on market equilibrium?

Answer: A subsidy lowers the equilibrium price and increases quantity. Government payment to producers shifts supply rightward.

Flashcard 75: What happens if both demand and supply increase simultaneously?

Answer: Equilibrium quantity increases; price effect is indeterminate. Price depends on relative magnitudes of shifts.

Flashcard 76: What is the result of an increase in income for an inferior good?

Answer: Decreases demand, lowering both equilibrium price and quantity. Higher income decreases demand for inferior goods.

Flashcard 77: What is the effect of an excise tax on producers?

Answer: Shifts supply curve leftward, increasing price and lowering quantity. Per-unit tax reduces supply by increasing production costs.

Flashcard 78: What is the result of an increase in income for a normal good?

Answer: Increases demand, raising both equilibrium price and quantity. Higher income increases demand for normal goods.