NOTE_Lecture_4_-_mkt_equilibrium_price_c

NOTE_Lecture_4_-_mkt_equilibrium_price_c - Market...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
10/1/2009 1 Market equilibrium, Objectives Definition of market equilibrium: Pe and Qe Impacts of shifts in D and/or S on Pe and Qe Price ceilings – Definition and graphing – Examples and impacts Price floors – Definition and graphing – Examples and impacts Market equilibrium Market equilibrium: where D = S Pe = equilibrium price Qe = equilibrium quantity The market will ALWAYS tends toward equilibrium Price Quantity D S Pe Qe
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
10/1/2009 2 Explanation of market equilibrium At P1, Qs > Qd …surplus! With the surplus, price will tend to fall towards Pe Therefore, the market will ALWAYS tends toward equilibrium D S P Q P1 Qs Qd Explanation of market equilibrium At P2, Qd > Qs …shortage! With the shortage, price will tend to rise towards Pe Therefore, the market will ALWAYS tends toward equilibrium D S P Q P2 Qd Qs Examples of market equilibrium D S Qe Pe Price of oil rises; impact on mkt for electricity? Price of electricity rises; impact on
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 4

NOTE_Lecture_4_-_mkt_equilibrium_price_c - Market...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online