Market Dynamics: Supply, Demand, and Equilibrium

317 A slide along the same curve occurs when the quantity demanded changes as a result of a change in the price of that commodity. The shift occurs because any other factor varies.

318 Increase in the price of a good substitute; declining price of complementary goods, income growth (if it is a normal good), low income (if it is an inferior good), increased the public's preferences for that good.

319 Lowering the price of a good replacement, increased the price of complementary goods, income growth (if it is an inferior good), low income (if it is a normal good), drop in public preferences for that good.

361 A surplus is one in which, for a given price, the quantity supplied exceeds the quantity demanded. It is corrected when the producers, unable to dispose of the goods stored, cut prices to regain the equilibrium price.

362 A shortage is one in which, for a given price, quantity demanded exceeds the quantity supplied. It is corrected when buyers, unable to buy all they want at a set price, offer higher prices and companies raise them. The process will continue until it reaches the equilibrium price.

368 The demand curve is downward sloping. The supply curve is increasing. There is only one equilibrium price that equates supply with demand. Excess demand causes price increases. Oversupply causes price reduction. The shift in the demand or supply adjusts the price and the equilibrium quantity.

369 A perfect market is one involving a large number of buyers and sellers of a single homogeneous good and that they have perfect information of what happens in the market. This means that no participant may exercise a decisive influence on the price.

377 Firms survive because the costs equal revenues, and these include the cost of capital contributed by the employer and the salary of the executives who run the company, plus staff costs and other expenses.

378 In a market with authority, an entity exists capable of fixing the prices of products, production quantities, or both magnitudes. In the free market reigns the principle of freedom of exchange for transactions.

379 Market discrepancies occur when there are different prices for identical products. In a transparent market exists the principle of unit price, since each buyer knows the prices of all sellers.

380 Perfect markets have perfectly homogeneous and undifferentiated goods; an imperfect market is one in which the goods have different characteristics.