Richard Damra Monday, January 21, 2013
Econ 1BB3 – Chapter 4 Equilibrium
Equilibrium price: the price for which Qs = Qd
Equilibrium quantity: the quantity that corresponds to equilibrium price
Comparative Statics: We start at equilibrium, something will change one of the curves will shift
and we end up with new eq. so we compare old equilibrium with new equilibrium.
If Qs > Qd there is a surplus
Stocks build up and firms decrease price until equilibrium is restored (include graph of surplus)
Three step program for analyzing changes in equilibrium
1. Decide whether the event shifts the supply or demand curve (or perhaps both). It is very rare
that there is an event that shifts both curve.
o Ask yourself: If I am a buyer does this shock affect how much I want to buy? If yes it is