ECON 2300 Study Guide - Market Price, Isoquant, Farad
12 Feb 2014
School
Department
Course
Professor
Document Summary
Market equilibrium: a market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers, d(p*) = s(p*); the market is in equilibrium, d(p ) > s(p ); an excess of quantity demanded over quantity supplied. Market price must rise towards p*: d(p") < s(p"); an excess of quantity supplied over quantity demanded. An example of calculating a market equilibrium when the market demand and supply curves are linear pd a bp ps c dp. At the equilibrium price p*, d(p*) = s(p*). a bp c dp p ca db pdq ps bc ad db. At the equilibrium quantity q*, d-1(p*) = s-1(p*). Page 3 of 19 (cid:219) (cid:219) qa b qc d q bc ad db qdp. Two special cases: quantity supplied is fixed, independent of the market price, and quantity supplied is extremely sensitive to the market price. Market quantity supplied is fixed, independent of price.
