Lec04 - Equilibrium u market equilibrium - equilibrium...

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1 u pressure for increase in price u excess demand or shortage u equilibrium where demand and supply curves cross Equilibrium u market equilibrium - equilibrium price and quantity u quantity demanded by consumers is equal to quantity supplied by firms with no pressure to change Quantity Price (per unit) S D Q E P E E u Do market forces operate so that price and quantity move towards the equilibrium? u Suppose market price < p E u Q D > Q S u Suppose market price > p E u excess supply or surplus u Q S > Q D u pressure for price to fall surplus shortage u excess demand at current price u increase in demand u demand shift gives movement along supply curve u upward pressure on price Comparative Statics u comparative statics --- shifting demand and supply u compare original and new equilibrium price and quantity D S Quantity Price (per unit) E u new equilibrium price determined by demand Comparative Statics u comparative statics --- shifting demand and supply u
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This note was uploaded on 10/10/2009 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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Lec04 - Equilibrium u market equilibrium - equilibrium...

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