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Market Equilibrium

Market Equilibrium. What is it?. When the supply of a product is equal to the demand of a product at a certain price. This means that there is no excess demand or supply. That is, producers do not make more or less product than what consumers demand, at a certain price point. S. D.

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Market Equilibrium

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  1. Market Equilibrium

  2. What is it? • When the supply of a product is equal to the demand of a product at a certain price. • This means that there is no excess demand or supply. That is, producers do not make more or less product than what consumers demand, at a certain price point.

  3. S D Excess supply Excess demand

  4. The demand curve shifts to the right. 1)This means there is an increase or decrease in demand? 2)What is the new equilibrium price? Is it higher or lower? 3)If firm refused to increase supply from the original equilibrium price would there be excess supply or excess demand. 4) By how much? S D1 D2

  5. S An decrease in demand Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity D1 D2 D2

  6. S1 S2 An increase in supply Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity D

  7. S2 An decrease in supply Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity S1 D

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