combining supply and demand. equilibrium equilibrium is the point where supply and demand come...
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![Page 1: Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market](https://reader036.vdocuments.us/reader036/viewer/2022083009/5697bfc51a28abf838ca6dc3/html5/thumbnails/1.jpg)
Combining Supply and Demand
![Page 2: Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market](https://reader036.vdocuments.us/reader036/viewer/2022083009/5697bfc51a28abf838ca6dc3/html5/thumbnails/2.jpg)
Equilibrium
• Equilibrium is the point where supply and demand come together– Balance between price
and quantity– The market is good
and stable
![Page 3: Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market](https://reader036.vdocuments.us/reader036/viewer/2022083009/5697bfc51a28abf838ca6dc3/html5/thumbnails/3.jpg)
Market Disequilibrium
• Market price or quantity supplied is anywhere but at the equilibrium price the– market is in a state
called disequilibrium.
• There are two causes for disequilibrium:– Excess of Supply– Excess of Demand
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Excess of Supply
• Excess supply occurs when quantity supplied exceeds quantity demanded.
![Page 5: Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market](https://reader036.vdocuments.us/reader036/viewer/2022083009/5697bfc51a28abf838ca6dc3/html5/thumbnails/5.jpg)
Excess of Demand
• Excess demand occurs when quantity demanded is more than quantity supplied.
![Page 6: Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market](https://reader036.vdocuments.us/reader036/viewer/2022083009/5697bfc51a28abf838ca6dc3/html5/thumbnails/6.jpg)
Price Floor
• A price floor is a minimum price, set by the government, that must be paid for a good or service.
• Can be setup above or below equilibrium• Putting the floor above equilibrium is the
preferred method.
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Price Floor
• Above equilibrium– Consumers don’t
want to buy goods– Suppliers will then
supply more– LAW OF SUPPLY
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Price Ceiling
• A price ceiling is a maximum price that can be legally charged for a good.
• Can be setup above or below equilibrium• Putting the ceiling below equilibrium is the
preferred method
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Price Ceiling
• Below equilibrium• Creates more
demand than at equilibrium.
• Supply will go down• LAW OF DEMAND
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Pric
e pe
r slic
e
Equilibrium Point
Finding Equilibrium
Price of a slice of
pizza
Quantity demanded
Quantity supplied Result
Combined Supply and Demand Schedule
$ .50 300 100
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$.50
Slices of pizza per day
050 100 150 200 250 300 350
Supply Demand
Balancing the MarketInteractions between buyers and sellers will
always push the market back towards equilibrium.
$2.00
$2.50
$3.00
150
100
50
250
300
350
Surplus from excess supply
$1.50 200 200 Equilibrium
Equilibrium Price
a
Equi
libriu
m
Qua
ntity
$1.00 250 150
Shortage from excess demand