Market equilibrium
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Intros
Lessons
- Market Equilibrium Overview:
- Definition of Market Equilibrium
- Equilibrium
- Equilibrium price
- Equilibrium quantity
- Finding the equilibrium price and quantity example
- Regulating Using Price
- Case 1: price is below the equilibrium price
- Case 2: price is above the equilibrium price
- Price Adjustments
- Case 1: shortage forces price up
- Case 2: surplus forces prices down
Examples
Lessons
- Finding the Market Equilibrium
Suppose the demand for ice cream is P = 60 - , and the supply for ice cream is = 10 + 3P. Find the equilibrium price and quantity. - Suppose the demand for chocolate is P = 30 - , and the supply for ice cream is = 10 + P. Find the equilibrium price and quantity.
- Understanding Price Regulations
The price is set below the equilibrium price, then- There is an excess of the product
- There is a shortage of the product
- There is neither an excess or shortage of the product
- The quantity demanded is equal to the quantity supplied
- The demand and supply schedules for phones are:
Price
Quantity Demanded
Quantity Supplied
50
500
200
100
400
300
150
300
400
200
200
500
250
100
600
- Draw a graph for the market of phones and mark the equilibrium price and quantity.
- Suppose the price of phones is $100. Describe the situation of the phone market. Is there an excess or shortage of phones? How much excess or shortage is there?
- Suppose that the price of phones is $200. Describe the situation of the phone market. Is there an excess or shortage of phones? How much excess or shortage is there?
- Understanding Price Adjustments
When there is a shortage of the product, then- The quantity supplied is greater than the quantity demanded.
- The price will decrease until it reaches the equilibrium price.
- The price will increase until it reaches the equilibrium price.
- Suppliers lower their production to increase their equilibrium price.
- The demand and supply schedules for candies are:
Price
Quantity Demanded
Quantity Supplied
10
120
70
20
100
90
30
80
110
40
60
130
50
40
150
- Draw a graph for the market of phones and mark the equilibrium price and quantity.
- Suppose the price of candy is $20. Describe the situation of the candy market and how the price adjusts.
- Suppose that the price of phones is $30. Describe the situation of the candy market and how the price adjusts.