Equilibrium Part II

Equilibrium Part II - Equilibrium Part II Equilibrium:...

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Equilibrium Part II
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2 Equilibrium: Putting Supply and Demand Together • When a market is in equilibrium – Both price of good and quantity bought and sold have settled into a state of rest – The equilibrium price and equilibrium quantity are values for price and quantity in the market but, once achieved, will remain constant • Unless and until supply curve or demand curve shifts • The equilibrium price and equilibrium quantity can be found on the vertical and horizontal axes, respectively – At point where supply and demand curves cross
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3 Figure 7: Market Equilibrium E H J 1.00 $3.00 D S 50,000 75,000 25,000 Excess Demand 4. until price reaches its equilibrium value of $3.00 . 2. causes the price to rise . . . 3. shrinking the excess demand . . . 1. At a price of $1.00 per bottle an excess demand of 50,000 bottles . . . Number of Bottles per Month Price per Bottle
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4 Excess Demand: Putting Supply and Demand Together • Excess demand – At a given price, the excess of quantity demanded over quantity supplied • Price of the good will rise as buyers compete with each other to get more of the good than is available
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5 Figure 8: Excess Supply and Price Adjustment 3. shrinking the excess supply . . .
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Equilibrium Part II - Equilibrium Part II Equilibrium:...

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