Download unit 2 3 lesson 6 - market equilibrium PDF

Titleunit 2 3 lesson 6 - market equilibrium
TagsEconomic Equilibrium Supply (Economics) Demand Supply And Demand Economic Theories
File Size260.7 KB
Total Pages10
Document Text Contents
Page 4

Excess SupplyExcess Supply
Market disequilibriumMarket disequilibrium
where the market is notwhere the market is not
efficient.efficient.

Occurs when the price isOccurs when the price is
set above the marketset above the market
clearing price such thatclearing price such that

Quantity Supplied >Quantity Supplied >
Quantity DemandedQuantity Demanded

Page 7

Changes in DemandChanges in Demand

1.1. InIncrcreaease se in in DeDemamand nd (D(D1-1-D2D2).).

2.2. At At PrPricice Pe P1 - 1 - QdQd2 >2 >QsQs1 c1 crereatatiningg

excess demand at P1.excess demand at P1.

3.3. SiSigngnal al to to ththe me mararkeket tt to io incncrereasasee

price from P1 - P2 thus increasingprice from P1 - P2 thus increasing

the Qs.the Qs.

4.4. ThThererefeforore, ae, an inn incrcreaease ise in Den Demamandnd

from D1 - D2 due to a from D1 - D2 due to a change in achange in a

non-price determinant of Demandnon-price determinant of Demand

leads to an increase in Price fromleads to an increase in Price from

P1 - P2 and an increase inP1 - P2 and an increase in

Quantity Supplied Quantity Supplied  from Q1 - Q2. from Q1 - Q2.
http://www.personal.pshttp://www.personal.psu.edu/~dxl31/econ2/Su.edu/~dxl31/econ2/Spring_2006/demand_increaspring_2006/demand_increase.pnge.png

Page 8

Decrease in DemandDecrease in Demand

1.1. DeDecrcreaease se in in DeDemamand nd (D(D-D-Dnenew)w)..

2.2. At At PrPricice Pe P1 - 1 - Qs Qs > Q> Qdndnew ew crcreaeatitingng

excess supply at P1.excess supply at P1.

3.3. SiSigngnal al to to ththe me mararkeket tt to do dececrereasasee

price from P1 - P2 thus decreasingprice from P1 - P2 thus decreasing

the Qs.the Qs.

4.4. ThThererefeforore, e, a da dececrereasase ie in Dn Dememanandd

from D - Dnew due to from D - Dnew due to a change in aa change in a

non-price determinant of Demandnon-price determinant of Demand

leads to an decrease in Price fromleads to an decrease in Price from

P1 - P2 and a decrease inP1 - P2 and a decrease in QuantityQuantity

Supplied Supplied  from Q1 - Q2. from Q1 - Q2.
http://www.raybrhttp://www.raybromley.com/notesomley.com/notes/noteimages/equilibrium/dec/noteimages/equilibrium/decrdemandeq.jpgrdemandeq.jpg

Page 9

Increase SupplyIncrease Supply

1.1. InIncrcreeasase ie in Sn Supuppply ly (S (S - S- S11).).

2.2. At At PrPricice e P - P - QsQs1 1 >Q>Qd d crcreaeatitingng

excess supply at P.excess supply at P.

3.3. SiSigngnal al to to ththe me mararkeket tt to do dececrereasasee

price from P - P1 thus increasingprice from P - P1 thus increasing

the Qd from Q - Q1.the Qd from Q - Q1.

4.4. ThThererefeforore, ae, an inn incrcreaease ise in Sun Supppplyly

from S - S1 due to a from S - S1 due to a change in achange in a

non-price determinant of Supplynon-price determinant of Supply

leads to an decrease in Price fromleads to an decrease in Price from

P - P1 and an increase inP - P1 and an increase in QuantityQuantity

Demanded Demanded  from Q - Q1. from Q - Q1.

Similer Documents