Question: What is the government's role in addressing surplus or shortage in the market?

Answer: The government can play a role in the market when it comes to surplus and shortage.
Governments typically purchase the amount of the surplus or impose production restrictions in
an attempt to reduce the surplus to bring the market back to equilibrium. If there is a shortage,
the government will not allow the market to dictate the price of the thing or service.

Question: What are the demand schedule and the demand curve, and how are they related?
Why does the demand curve slope downward?

Answer: The demand schedule shows that as price rises, quantity demanded decreases, and
vice versa. These points are then graphed, and the line connecting them is the demand curve
(D). The downward slope of the demand curve again illustrates the law of demand—the inverse
relationship between prices and quantity demanded.

Question: Will the market crash if the price isn't at the equilibrium?

Answer: No, to return to equilibrium, the market will typically change smoothly. Only when
there's a drastic shift in supply or demand will the market crash.

Question: How does supply schedule and supply curve relate?

Answer: Both the supply schedule and supply curve are related because supply schedule is a
table showing the quantity of supplies on the market at different prices. Meanwhile, supply
curve indicates the relationship on a graph between the quantity supplied and the price.

Question: What happens if the supply is more than the demand?

Answer: As we will see after, if demand is greater than the supply, there is a shortage more
items are demanded at a higher price, less items are offered at this same price, therefore, there
is a shortage. If the supply increases, the price decreases, and if the supply decreases, the price
increases.

Question: Describe the role of prices in market economies.

Answer: The price of goods plays a crucial role in determining an efficient distribution of
resources in a market system. Price acts as a signal for shortages and surpluses which help firms
and consumers respond to changing market conditions. If a good is in shortage – price will tend
to rise. Rising prices discourage demand, and encourage firms to try and increase supply. If a
good is in surplus – price will tend to fall. Falling price encourage people to buy, and cause firms
to try and cut back on supply. Prices help to redistribute resources from goods with little
demand to goods and services which people value more.

Question: What are the supply schedule and the supply curve and how are they related?
Answer: A supply schedule shows how much of a product is supplied at a given price. The
supply curve is a graph representing the supply schedule. The supply curve slopes upward
because as a good sells for higher prices firms will expand production to make more money.

Question: Define the equilibrium of a market and describe the different forces that move the
market towards its equilibrium.

Answer: Equilibrium is a condition or state in which economic forces are balanced. The
different forces that move the market towards its equilibrium are shortage and surplus. If the
price is above the equilibrium price, sellers want to sell more than buyers want to buy, so there
is a surplus. Sellers try to increase their sales by cutting prices. That continues until they reach
the equilibrium price. If the price is below the equilibrium price, buyers want to buy more than
sellers want to sell, so there is a shortage. Sellers can raise their price without losing customers.
That continues until they reach the equilibrium price.

Question: What happens when governments impose price floors and price ceilings?

Answer: Price floors and price ceilings are imposed for price control they limit the price issued
by sellers making sure that sellers don't abuse their control over the price in some situations.
When governments impose price floors and price ceilings it prevents sellers from going over or
going under that price so that it stays close to the ever-changing equilibrium of the market.