Market Equilibrium and Disequilibrium - AP Macroeconomics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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