Microeconomics Unit Test

when the quantity that producers are willing and able to supply is exactly equal to the quantity that consumers are willing and able to buy

If the product was sold at any other price than the equilibrium price, the market would be in disequilibrium, "out of balance". The quantity demanded and quantity supplied would not be equal, creating shortages or surpluses of the good in the market.

Qs > Qd

Qs < Qd

when disequilibrium occurs, market forces of the "invisible hand" as theorized by Adam Smith will cause price to increase or decrease back to equilibrium price.

- tastes of consumers
- price of related goods (substitutes and complements)
- the expectations of consumers of future prices
- consumer's income (depends on whether a good is normal or inferior)
- the number of consumers
- special circumstances

- government subsidies and taxes (subsidies increase supply, taxes decrease supply)
- technology used in the production of the good
- other goods prices (substitutes in production)
- resource prices (materials used to produce a good)
- the expectations of producers of future prices
- the number of producers
- special circumstances