Page 98 - F1 - AB Integrated Workbook STUDENT 2018-19
P. 98
Chapter 7
The price mechanism
5.1 Equilibrium
Equilibrium price set by the interaction of supply and demand
P
D S
P eqm
Q
Q eqm
Price higher than equilibrium Price lower than equilibrium
P P
D S D S
S > D
P 1
P 2
D > S
Q Q
Excess supply – producers drop prices Excess demand – shortages force
to clear surplus prices up
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