Market equilibrium
Download
1 / 15

MARKET EQUILIBRIUM - PowerPoint PPT Presentation


  • 153 Views
  • Updated On :

MARKET EQUILIBRIUM. Microeconomics Made Easy by William Yacovissi Mansfield University William Yacovissi All Rights Reserved. MARKET EQUILIBRIUM. Market equilibrium is perhaps the most important concept in economics.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'MARKET EQUILIBRIUM' - aizza


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Market equilibrium l.jpg

MARKET EQUILIBRIUM

Microeconomics Made Easy

by

William Yacovissi

Mansfield University

William Yacovissi All Rights Reserved


Market equilibrium2 l.jpg
MARKET EQUILIBRIUM

  • Market equilibrium is perhaps the most important concept in economics.

  • Demand and supply are independent of each other. What you will pay for a product depends on how valuable it is to you, not what it cost to make it. Likewise, a willingness to produce and supply a product is determined by the cost of production.


Market equilibrium3 l.jpg
MARKET EQUILIBRIUM

  • How are the differences between demanders who want to buy at a low price, and suppliers who want to sell at a high price reconciled?

  • Like any other disagreement, the two sides negotiate to see if there is a any way they can agree on a price and a quantity.


Market equilibrium4 l.jpg
MARKET EQUILIBRIUM

  • These negotiations take place through the auction of the marketplace, in which offers to buy and sell are made.

  • If no agreement can be reached on price and quantity, the negotiations stop, the product doesn’t get produced, and consumers don’t get to buy it.


Market equilibrium5 l.jpg
MARKET EQUILIBRIUM

  • If an agreement can be reached on price and quantity, the product gets produced and sold to everyone’s satisfaction.

  • This price and quantity that satisfies the desires of consumers and the desires of producers is called the market equilibrium.


Market equilibrium6 l.jpg
MARKET EQUILIBRIUM

  • It exists if there is some price and quantity on the demand curve that is the same as the price and quantity on the supply curve.

  • If this point does not exists, there will be no market for the product.


Market equilibrium7 l.jpg
MARKET EQUILIBRIUM

  • With supply and demand information, the existence of this point can be quickly established.

  • Using the example of video rentals, it can easily be seen that a price of $3 and a quantity of 300 is the market equilibrium.


Market equilibrium8 l.jpg
MARKET EQUILIBRIUM

  • In a real market, participants have to discover what the equilibrium is. This can be done because any price other than the equilibrium price results in a surplus or shortage of the good in the market.




Market equilibrium in equation form l.jpg
MARKET EQUILIBRIUM IN EQUATION FORM

Qd = 600 - 100(Price) and Qs = 100(Price)Set: Qd = Qs

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

Simplify: 600 = 200(Price)

Solve: $3 = Price

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

Qd = 600 - 100(3) Qs = 100(3)

Qd = 300 Qs = 300


Market disequilibrium l.jpg
MARKET DISEQUILIBRIUM

  • A market left alone will automatically move to a market equilibrium. Why is this so?

  • Because any price other than the equilibrium price results in a surplus or shortage in the market


Market disequilibrium13 l.jpg
MARKET DISEQUILIBRIUM

  • The existence of a surplus or shortage triggers a price change in the right direction

  • Can you see why?

  • A surplus causes prices to fall and a shortage causes prices to rise.




ad