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Lecture #6 - Sept 28.docx

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Department
Economics
Course
Economics 1021A/B
Professor
Michael Parkin
Semester
Fall

Description
Nicole Wallenburg Mr. Parkin Economics Sept 28, 2011 Economics – Lecture #6 Market Equilibrium Equilibrium is a situation in which opposing forces balance each other. Equilibrium in a market occurs when the price balances the plans of buyers and sellers. The equilibrium price is the price at which the quantity demanded equals the quantity supplied. The equilibrium quantity is the quantity bought and sold at the equilibrium price.  Price regulates buying and selling plans.  Price adjusts when plans don’t match Price Adjustments At prices above the equilibrium price, a surplus forces the price down. At prices below the equilibrium price, a shortage forces the price up. At the equilibrium price, buyers’ plans and sellers’ plans agree and the price doesn’t change until some event changes either demand or supply. All Possible Changes in Demand and Supply A change demand or supply or both demand and supply changes the equilibrium price and the equilibrium quantity.  Change in Demand with No Change in Supply o When demand increases, equilibrium price rises and the equilibrium quantity increases.  Change in Demand with No Change in Supply o When demand decreases, the equilibrium price falls and the equilibrium quantity decreases.  Change in Supply with No Change in Demand o When supply increases, the equilibrium price falls and the equilibrium quantity increases.  Change in Supply with No Change in Demand o When supply decreases, the equilibrium price rises and the equilibrium quantity decreases.  Increase in Both Demand and Supply
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