NOTE_Lecture_4_-_mkt_equilibrium_price_c

NOTE_Lecture_4_-_mkt_equilibrium_price_c - 10/1/2009 Market...

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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
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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
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This note was uploaded on 05/22/2011 for the course ECON 1B taught by Professor Jamie during the Spring '06 term at West Valley.

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NOTE_Lecture_4_-_mkt_equilibrium_price_c - 10/1/2009 Market...

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