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Defining market equilibrium

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a. What is market equilibrium? Does the market always reach equilibrium? Discuss

b. If there is surplus of gasoline in the market, then the price of gasoline will rise. True or false. Explain.

Please provide examples for better understanding.

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Solution Preview

a. What is market equilibrium? Does the market always reach equilibrium? Discuss

Market equilibrium represents a situation in the market wherein supply of an item is exactly equal to ...

Solution Summary

A definition of market equilibrium as well as a response of the market to a surplus in the gasoline market.

Similar Posting

Definition of some economics terms, using the midpoint formula to calculate the Price Elsticity of Demand

The questions are in the attachment files 1 and 2.

Question 1

Define or explain the following economic terms:

a) Quantity demanded
b) Quantity supplied
c) Market equilibrium
d) Consumer surplus
e) Price elasticity of demand

Question 2

By using the midpoint formula, calculate the price elasticity for each of the following changes in demand by a household.
Demand for P1 P2 Q1 Q2

(a) Long-distance phone service $0.25 per min. $0.15 per min. 300 min. 400 min.
per month per month

(b) Orange juice 1.50 per qt. 1.90 per qt. 14 qt 12 qt
per month per month

Question 3

Do you agree or disagree with each of the following statements? Briefly explain your answers.

(a) The price of a good rises, causing the demand for another good to fall. The two goods are therefore substitutes.
(b) If demand increases and supply increases at the same time, price will clearly rise.
(c) A shift in supply causes the price of a good to fall. The shift must have been an increase in supply.

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