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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.