← Market equilibrium
Reading the notation
A small set of terms and a handful of two-letter abbreviations carry this whole standard — every real question uses them to label a graph you partly build yourself.📖 Terms used in market equilibrium
7 termsCover the right column and check you can say what each one means.
- Pe, Qe
- Equilibrium price and quantity — where the demand and supply curves intersect, and the market clears.
- Movement along vs shift
- A change in the good's OWN price moves you ALONG the curve; anything else (income, tastes, costs, technology) SHIFTS it.
- PED / YED / XED
- Price, income, and cross elasticity of demand — how much quantity demanded responds to a change in price, income, or another good's price.
- Consumer surplus (CS)
- The gap between what buyers were willing to pay and what they actually pay — the triangle under D, above the price.
- Producer surplus (PS)
- The gap between the price received and the minimum suppliers would accept — the triangle above S, below the price.
- Allocative efficiency
- The market outcome where marginal benefit (D) equals marginal cost (S), so total surplus (CS + PS) is maximised.
- Deadweight loss (DWL)
- Surplus lost when quantity is pushed away from Qe by a tax, tariff, subsidy, or price control — trades that would have benefited both sides no longer happen.
Before writing anything
- Skim for a world-price line, a compare-elastic-vs-inelastic instruction, or a "how is equilibrium restored" prompt — these signal the deeper skill sections further down this page.