Describe What Would Happen in a Market If the Current

question 200

Essay

Describe what would happen in a market if the current price were above the equilibrium price (assume no government interference).Using the same assumptions, describe what would happen if the current price were below the equilibrium price.Use a graph to explain your answer.

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Definitions:

Variable Cost

Costs that change in proportion to the good or service that a business produces, such as raw materials and labor.

Fixed Costs

Costs that do not change with the level of output or production, such as rent, salaries, and insurance payments.

Losing Money

Losing money describes a situation where an individual or business expends more money than is received over a certain period, resulting in financial loss.

Average Variable Cost

The sum of all costs that vary with output levels, divided by the total number of units produced.