Edexcel Economics 1.2.7 Price Determination

Equilibrium price is

• The price at which there is no tendency to change because planned (or desired or ex ante) purchases (i.e. demand) are equal to planned sales (i.e. supply).

• Where demand is greater than supply

• Where supply is greater than demand

• The price at which there is neither excess demand nor excess supply but where everything offered for sale is purchased

Excess demand is

• Where demand is greater than supply.

• Where supply is greater than demand.

• Where there is a shortage

• Where there is a surplus

Excess supply is

• Where demand is greater than supply.

• Where supply is greater than demand.

• Where there is a shortage

• Where there is a surplus

Free Market forces are

• supply

• demand

• demand and supply

Disequilibrium price is

• The price at which there is no tendency to change because planned (or desired or ex ante) purchases (i.e. demand) are not equal to planned sales (i.e. supply).

• Where demand is greater than supply

• Where supply is greater than demand

• The price at which there is either excess demand or excess supply, where everything offered for sale is not purchased

Factors affecting supply are

• Pasific + P

• BRITS

• SPLATT

• PINTSWC + CJS + P

Factors affecting demand are

• Pasific + P

• BRITS

• SPLATT

• PINTSWC + CJS + P

Factors affecting PED are

• Pasific + P

• BRITS

• SPLATT

• PINTSWC + CJS + P

Factors affecting PES are

• Pasific + P

• BRITS

• SPLATT

• PINTSWC + CJS + P

In supply the long run is

• the period of time when all factor inputs can be varied but the state of technology remains constant.

• the period of time when at least one factor input to the production process can be varied.