ECO 1302 Lecture Notes - Lecture 6: Price Ceiling, Shortage, Demand Curve
13 Feb 2018
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Document Summary
If quantity supplied exceeds quantity demanded, then there will be a surplus which will cause the price to fall. Demand and supply in product markets: a review. A demand curve shows how much of a product a household would buy if it could buy all it wanted at the given price. A supply curve shows how much of a product a firm would supply if it could sell all it wanted at the given price. The process by which market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied. The adjustment of price is the rationing mechanism in free markets. There is some price that will clear any market, even if supply is strictly limited. In an auction for a unique painting, the price (bid) will rise to eliminate excess demand until there is only one bidder willing to purchase the single available painting. Some estimate that mona lisa would sell for 600 million if auctioned.
