4 Equilibrium Student Copy

4 Equilibrium Student Copy - Equilibrium Part 1 Definition...

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Equilibrium Part 1: Definition, Shortages and Surpluses Chapter 3 It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest – Adam Smith
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Define Market Equilibrium Market Equilibrium is where Quantity demanded (Qd) and Quantity Supplied (Qs) are equal. The price and quantity at a market equilibrium are called Equilibrium Price (P*) and Equilibrium Quantity (Q*)
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The Invisible Hand The Invisible Hand Term used by Adam Smith to describe the natural force that guides free market. According to Adam Smith, in a free market each participant will try to maximize self- interest, and the "invisible hand" will guide market participants to trade in the most mutually beneficial manner. No regulation of any type is needed
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The Invisible Hand at Work in a Shortage A shortage is when quantity demanded in an economy is greater than quantity supplied. Suppose we have a market for a particular 
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This note was uploaded on 12/12/2011 for the course ECON 2306 taught by Professor Bailiff during the Spring '08 term at UT Arlington.

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4 Equilibrium Student Copy - Equilibrium Part 1 Definition...

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