What are dynamic markets?
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What are dynamic markets?
Dynamic markets are real world markets that are constantly changing.
Define the term disequilibrium.
Disequilibrium occurs when there is excess demand or excess supply in a market.
How do market forces respond to disequilibrium?
Market forces seek to clear excess demand or supply.
What causes an increase in demand?
An increase in demand is caused by a change in the conditions of demand.
Define the term excess demand.
Excess demand occurs when the quantity demanded exceeds the quantity supplied at the current price.
State the meaning of the term supply shock.
A supply shock is an unexpected event that changes the supply of a good or service, such as the 2011 tsunami in Japan, which created a global supply shock.
What is the impact of inflation on demand?
Inflation lowers real income, reducing the demand for normal goods and services.
What is the aim of a subsidy?
A subsidy is a payment from the government to the producer with the aim of increasing the supply of a good or service.
True or False?
An increase in supply lowers the equilibrium price.
True.
An increase in supply lowers the equilibrium price.
How do markets respond to excess demand?
Sellers usually raise prices in response to excess demand.
What is the market's response to excess supply?
Excess supply usually causes sellers to lower prices.