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SUPPLY & DEMAND

EQUILIBRIUM

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SITUATIONS WITH PRICE AND QUANTITY
DEMAND
EQUILIBRIUM
SHIFTS AND MOVEMENTS
SUPPLY
CAUSES FOR CHANGE
MARGINAL COSTS AND BENEFITS
LINKS

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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

SURPLUS

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 quantity supplied > quantity demanded
 
there is relatively low demand, or a severe increase in supply
 
prices should naturally fall to cover these changes

SHORTAGE

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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