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Textbook Notes - Sept 28.docx

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Department
Economics
Course Code
Economics 1021A/B
Professor
Michael Parkin

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Nicole Wallenburg Mr. Parkin Economics 12-04-23 Economics – Textbook Notes Market Equilibrium An 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 seller. A market moves towards its equilibrium because price regulates buying and selling plans, and price adjusts when plans don’t match Equilibrium Price The price at which the quantity demanded equals the quantity supplied Equilibrium Quantity The quantity bought and sold at equilibrium, price Price as a Regulator The price of a good regulates the quantities demanded and supplied if the price is too high, the quantity supplied exceeds the quantity demanded. If the price is too low, the quantity demanded exceeds the quantity supplied. Price Adjustments If price is below the equilibrium, there is a shortage and that if the price is above the equilibrium, there is a surplus 1. A Shortage Forces the Prices Up a. Some producers raise their prices b. Some producers increase their output i. This pushes up the price towards its equilibrium. ii. The rising price reduces the shortage because it decreases the quantity demanded and increases the quantity supplied iii. When the price has increases to the point at which there is no longer a shortage, the forces moving the price stop operating and the price comes to rest at its equilibrium 2. A surplus Forces the Price Down a. Some producers cut their prices b. Some producers scale back production i. This makes the price fall towards its equilibrium ii. The falling pr
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