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Market equilibrium is established when quantity supplied is equal to quantity demanded
At this point, the market sets the price (P) and quantity (Q) for a good or service
When equilibrium is established, both consumers and producers are made happy
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SURPLUS
quantity supplied > quantity demanded
there is relatively low demand, or a severe increase in supply
prices should naturally fall to cover these changes
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SHORTAGE
high demand, or low supply, also, price could
be lower than what the market would expect
the price should naturally increase due to cover these changes, aka the producer's
would raise prices due to high demand
Created Fall 2004
WFU '08
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