Chapter 6: Problem 1

Define: a. shortage b. surplus c. equilibrium (in a market) d. equilibrium quantity e. equilibrium price f. inventory g. price ceiling h. price floor

Short Answer

Expert verified

Shortage refers to a situation where demand is higher than supply. Surplus is when supply exceeds demand. Equilibrium in a market is when demand equals supply. Equilibrium quantity refers to the quantity at equilibrium. Equilibrium price, or market-clearing price, is the price at which demand equals supply. Inventory refers to goods or materials in stock. Price ceiling is the maximum legal selling price and a price floor is the minimum legal selling price.

Step by step solution

Definition of shortage

Shortage refers to a situation where the demand for a particular product or service exceeds its supply in a market.

Definition of surplus

Surplus pertains to a situation where the supply of a certain product or service surpasses its demand in a market.

Definition of equilibrium (in a market)

Market equilibrium is a state in which the quantity demanded and the quantity supplied are equal. It depicts a balance between product availability and consumer desire at a specific price.

Definition of equilibrium quantity

Equilibrium quantity is the quantity of goods or services provided in a market when it is at equilibrium. Essentially, it's the point of intersection between the demand and supply curves.

Definition of equilibrium price

Equilibrium price, also known as the market-clearing price, refers to the price at which the quantity of goods or services demanded equals the quantity supplied. It is the price at which the demand and supply curves intersect.

Definition of inventory

Inventory refers to the quantity of goods or materials on hand or in stock. Businesses keep inventory to meet customer demand.

Definition of price ceiling

Price ceiling is the maximum price a seller can legally charge for a product or service. It is typically set by government regulations and is meant to protect consumers from price gouging in times of shortage.

Definition of price floor

Conversely, a price floor is the minimum price that can legally be charged for a product or service. It is also typically set by government regulations and is designed to protect producers.

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