ECON 1 Lecture Notes - Lecture 6: Price Floor, Shortage, The Purchase Price

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Equilibrium price or market clearing price is the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied. Equilibrium quantity is the point at which the intentions of buyers n sellers match and the quantity supplies are equal. Surplus is an excess supply provided by produces which prompts sellers to lower the price to encourage buyers to take the surplus. Shortage or excess demand where the selling price discourages producers from providing the quantity. Rationing functions of prices- the ability of supply and demand prices to establish a price which provides consistent prices. Productive efficiency- production of any particular good at the least cost. Allocative efficiency- the particular mix of goods and services most highly valued by society, minimum cost production assumed. Constant demand for supply of some good results in the increase in the new.

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