2.6 Price Changes (Cambridge (CIE) IGCSE Economics)

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  • What are dynamic markets?

    Dynamic markets are real world markets that are constantly changing.

  • Define the term disequilibrium.

    Disequilibrium occurs when there is excess demand or excess supply in a market.

  • How do market forces respond to disequilibrium?

    Market forces seek to clear excess demand or supply.

  • What causes an increase in demand?

    An increase in demand is caused by a change in the conditions of demand.

  • Define the term excess demand.

    Excess demand occurs when the quantity demanded exceeds the quantity supplied at the current price.

  • State the meaning of the term supply shock.

    A supply shock is an unexpected event that changes the supply of a good or service, such as the 2011 tsunami in Japan, which created a global supply shock.

  • What is the impact of inflation on demand?

    Inflation lowers real income, reducing the demand for normal goods and services.

  • What is the aim of a subsidy?

    A subsidy is a payment from the government to the producer with the aim of increasing the supply of a good or service.

  • True or False?

    An increase in supply lowers the equilibrium price.

    True.

    An increase in supply lowers the equilibrium price.

  • How do markets respond to excess demand?

    Sellers usually raise prices in response to excess demand.

  • What is the market's response to excess supply?

    Excess supply usually causes sellers to lower prices.