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MARKET ADJUSTMENTS. Changes To Demand And Supply. MARKET ADJUSTMENTS. The price of a product remains at the equilibrium point until something changes the demand and/or supply in a market.

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Market adjustments l.jpg

MARKET ADJUSTMENTS

Changes To Demand And Supply


Market adjustments2 l.jpg
MARKET ADJUSTMENTS

  • The price of a product remains at the equilibrium point until something changes the demand and/or supply in a market.

  • Changes in market demand or market supply are not unusual, in fact, most markets have demands and supplies that drift around a bit.


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MARKET ADJUSTMENTS

  • Mostly, these change are ignored. However, large changes in demand or supply cannot be ignore.

  • It’s possible therefore, to examine the impact on equilibrium price and quantity of an increase or decrease in demand, and an increase or decrease in supply.




An increase in demand in equation form l.jpg
AN INCREASE IN DEMAND IN EQUATION FORM

Qd = 800 - 100(Price) and Qs = 100(Price)Set: Qd = Qs

Substitute: 800 - 100(Price) = 100(Price)

Simplify: 800 = 200(Price)

Solve: $4 = Price

Qd = 800 - 100(Price) Qs = 100(Price)

Qd = 800 - 100(4) Qs = 100(4)

Qd = 400 Qs = 400


Market adjustment to an increase in demand l.jpg
MARKET ADJUSTMENT TO AN INCREASE IN DEMAND

  • When demand increases a larger quantity is demanded at every price.

  • The result is an increase in price to $4.00 and an increase in quantity to 400.




A decrease in demand in equation form l.jpg
A DECREASE IN DEMAND IN EQUATION FORM

Qd = 400 - 100(Price) and Qs = 100(Price)Set: Qd = Qs

Substitute: 400 - 100(Price) = 100(Price)

Simplify: 400 = 200(Price)

Solve: $2 = Price

Qd = 400 - 100(Price) Qs = 100(Price)

Qd = 400 - 100(2) Qs = 100(2)

Qd = 200 Qs = 200


Market adjustment to a decrease in demand l.jpg
MARKET ADJUSTMENT TO A DECREASE IN DEMAND

  • When demand decreases a smaller quantity is demanded at every price.

  • The result is an decrease in price to $2.00 and an decrease in quantity to 200.




An increase in supply in equation form l.jpg
AN INCREASE IN SUPPLY IN EQUATION FORM

Qd = 600 - 100(Price) and

Qs = 100(Price) +200

Set: Qd = Qs

Substitute: 600-100(Price) = 100(Price)+200

Simplify: 400 = 200(Price)

Solve: $2 = Price

Qd = 600 - 100(Price) Qs = 100(Price)+200

Qd = 600 - 100(2) Qs = 100(2) + 200

Qd = 400 Qs = 400


Market adjustment to an increase in supply l.jpg
MARKET ADJUSTMENT TO AN INCREASE IN SUPPLY

  • When supply increases a larger quantity is supplied at every price.

  • The result is a decrease in price to $2.00 and an increase in quantity to 400.




A decrease in supply in equation form l.jpg
A DECREASE IN SUPPLY IN EQUATION FORM

Qd = 600 - 100(Price) and

Qs = 100(Price) - 200

Set: Qd = Qs

Substitute: 600-100(Price) = 100(Price)-200

Simplify: 800 = 200(Price)

Solve: $4 = Price

Qd = 600 - 100(Price) Qs = 100(Price)-200

Qd = 600 - 100(4) Qs = 100(4) - 200

Qd = 200 Qs = 200


Market adjustment to a decrease in supply l.jpg
MARKET ADJUSTMENT TO A DECREASE IN SUPPLY

  • When supply decreases a smaller quantity is supplied at every price.

  • The result is an increase in price to $4.00 and a decrease in quantity to 200.


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