ECN 102 Lecture Notes - Lecture 11: Economic Equilibrium, Shortage
Document Summary
When there is demand, there will be supply. Equilibrium: p has reached the level where quantity supplied equals quantity demanded. Equilibrium price: the price that equates quantity supplied with quantity demanded. To graph of supply demands graph find the x and y intercepts. Equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium price. Surplus (a. k. a. excess supply): when quantity supplied is greater than quantity demanded. Facing a surplus sellers try to increase sales by cutting price. Prices continue to fall until market reaches equilibrium. Shortage (a. k. a. excess demand): when quantity demanded is greater than quantity supplied. Facing a shortage sellers raise the price causing qd to fall and qs to rise . Prices continue to rise until market reaches equilibrium. To determine the effects of any event: decide whether even shifts s curve d curve, or both, decide in which direction curve shifts, use supply-demand diagram to see shift changes eq"m p and q.
