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Using the Supply and Demand Curves to Find Equilibrium definitions

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  • Equilibrium
    Occurs at the intersection of supply and demand curves, where market balance is achieved and no tendency for price change exists.
  • Equilibrium Price
    Market value at which quantity supplied matches quantity demanded, denoted as P* and found at the intersection point.
  • Equilibrium Quantity
    Amount exchanged in the market when supply and demand are balanced, labeled as Q* at the intersection.
  • Supply Curve
    Graphical representation showing how producers' willingness to offer goods changes with price, typically slopes upward.
  • Demand Curve
    Graphical line illustrating how buyers' willingness to purchase varies with price, usually slopes downward.
  • Schedule
    Table listing prices alongside corresponding quantities supplied and demanded, used to identify equilibrium without a graph.
  • Surplus
    Situation where quantity supplied exceeds quantity demanded, often resulting in downward pressure on price.
  • Shortage
    Condition where quantity demanded surpasses quantity supplied, typically causing upward pressure on price.
  • Law of Supply and Demand
    Principle stating that market prices adjust to eliminate surpluses and shortages, moving toward equilibrium.
  • Shift
    Movement of supply or demand curve due to external factors, altering equilibrium price and quantity.
  • Double Shift
    Simultaneous movement of both supply and demand curves, often resulting in ambiguity for either price or quantity.
  • Ambiguity
    Outcome in double shifts where direction of change for price or quantity cannot be determined without more information.
  • Notation
    Symbols such as P*, Q*, P1, Q1, P2, Q2 used to distinguish original and new equilibrium values after shifts.
  • Intersection
    Point on a graph where supply and demand curves cross, indicating equilibrium conditions.
  • Input Prices
    Costs of resources used in production, changes in which can shift the supply curve and affect equilibrium.