Page 9 - E-NOTE

CHAPTER 4: MARKET EQUILIBRIUM

DEFINITION/CONCEPT

MARKET EQUILIBRIUM: QUANTITY DEMANDED = QUANTITY SUPPLIED

MARKET DISEQUILIBRIUM: QUANTITY DEMANDED ≠ QUANTITY SUPPLIED

MARKET SHORTAGE: HAPPEN WHEN QD > QS

MARKET SURPLUS: HAPPEN WHEN QD < QS

PRICE CEILINGS: MAXIMUM LEGAL PRICE SET BY GOV BELOW EQUILIBRIUM
PRICE

PRICE FLOOR: MINIMUM LEGAL PRICE SET BY GOV ABOVE EQUILIBRIUM PRICE

CHANGES IN MARKET EQUILBRIUM

INCREASE IN DEMAND

• SHIFT TO THE RIGHT

• DUE TO (EX: FESTIVE SEASON)
• MARKET SHORTAGE EXIST

• EQUIL P AND Q INCREASE

DECREASE IN DEMAND

• SHIFT TO THE LEFT

• DUE TO (EX: A PROBLEM FOR CERTAIN PRODUCT)
• MARKET SURPLUS OCCURS
• EQUIL P AND Q DECREASE