Vocabulary
Price
The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.
Price Floor
A legally established minimum price that may be charged for a good or service.
Surplus
The situation that results when the quantity supplied of a product exceeds the quantity demanded. Generally happens because the price of the product is above the market equilibrium price.
Shortage
The situation that results when the quantity demanded for a product exceeds the quantity supplied. Generally happens because the price of the product is below the market equilibrium price.
Equilibrium Price (Market Clearing Price)
The price at which the quantity demanded by buyers equals the quantity supplied by sellers; also called the market-clearing price.
Equilibrium Quantity
The quantity demanded and quantity supplied at the equilibrium or market-clearing price.