Chapter 3

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vangeline
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78262
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Chapter 3
Updated:
2011-04-11 01:50:16
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Microeconomics
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  1. equilibrium price
    The price at the meeting point
  2. equilibrium quantity
    the quantity at the meeting point
  3. surplus
    a situation in which the quantity supplied is greater than the quantity demanded.
  4. shortage
    situation in which the quantity demanded is greater than the quantity supplied.

    • e.g.
    • Buyers also have an incentive to offer higher prices when there is a shortage because when they can’t buy as much as they want at the going price, they will try to outbid other buyers by offering sellers a higher price. Competition will push prices up whenever there is a shortage
  5. equilibrium
    the price at which the quantity demanded is equal to the quantity supplied.
  6. equilibrium quantity
    the quantity at which the quantity demanded is equal to the quantity supplied.
  7. free market maximizes the gains from trade, we mean three closely related things:
    1.The supply of goods is bought by the buyers with the highest willingness to pay.

    2.The supply of goods is sold by the sellers with the lowest costs.

    3.Between buyers and sellers there are no unexploited gains from trade nor any wasteful trades.

    Together these three conditions imply that the gains from trade are maximized.

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