ECON 2001.01 Chapter Notes - Chapter Market Equilibrium: Demand Curve, Market Clearing, Negative Relationship

459 views4 pages
Published on 12 Sep 2018
School
Ohio State University
Department
Economics
Course
ECON 2001.01
Professor
Equilibrium price: the price at which the quantity supplied of a good, service, or resource equals the
quantity demanded; the price at which the demand and supply curves intersect. Also known as the
market clearing price.
Equilibrium quantity: the quantity traded when the quantity supplied of a good, service, or resource
equals its quantity demanded. !
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Markets form to facilitate between buyers and sellers. !
Sellers want products at HIGHEST price and buyers want to pay LOWEST price!
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At equilibrium price there is no pressure to change price or quantity.!
Market = equilibrium then # of trades and anyone can buy or sell a unit at market price. !
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Shortage: a situation in which the quantity demanded is greater than the quantity supplied at
the current market price. Also called excess demand.!
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Surplus: A situation in which the quantity supplied is greater than the quantity demanded at the
current market price. Also called excess supply. !
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Quantity supplied Quantity demanded
Qs Qd
Market Equilibrium
S
yei
sg
lD
Qe
Quantity
shortage Qs Qd 20
Surplus Qs Qd 70
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Document Summary

Equilibrium price: the price at which the quantity supplied of a good, service, or resource equals the quantity demanded; the price at which the demand and supply curves intersect. Equilibrium quantity: the quantity traded when the quantity supplied of a good, service, or resource equals its quantity demanded. Markets form to facilitate between buyers and sellers. Sellers want products at highest price and buyers want to pay lowest price. At equilibrium price there is no pressure to change price or quantity. Market = equilibrium then # of trades and anyone can buy or sell a unit at market price. Shortage: a situation in which the quantity demanded is greater than the quantity supplied at the current market price. Surplus: a situation in which the quantity supplied is greater than the quantity demanded at the current market price. Markets naturally move to an equilibrium price where the quantity supplied equals the quantity demanded.

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