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Lecture 7 - Announcements On Friday we will do an...

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Announcements On Friday we will do an “experiment” in class using Aplia – bring your laptop. The experiment itself will not be graded so if you do not have a laptop, don’t worry – just follow along with someone else. Do both “Preparing for Experiment” assignments on Aplia by class on Friday! This is graded as a homework! Aplia payment “grace period” ends on Monday! Enter your payment code now if you have not. In Aplia, make sure you are signed up in the correct section (your class time).
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MARKET EQUILIBRIUM EXCESS DEMAND excess demand or shortage The condition that exists when quantity demanded exceeds quantity supplied at the current price.
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3 of 46 MARKET EQUILIBRIUM Excess Demand, or Shortage When quantity demanded exceeds quantity supplied, price tends to rise. When the price in a market rises, quantity demanded falls and quantity supplied rises until an equilibrium is reached at which quantity demanded and quantity supplied are equal.
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MARKET EQUILIBRIUM EXCESS SUPPLY excess supply or surplus The condition that exists when quantity supplied exceeds quantity demanded at the current price.
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5 of 46 MARKET EQUILIBRIUM Excess Supply, or Surplus When quantity supplied exceeds quantity demanded at the current price, the price tends to fall. When price falls, quantity supplied is likely to decrease and quantity demanded is likely to increase until an equilibrium price is reached where quantity supplied and quantity demanded are equal.
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Supply and Demand Using this supply and demand model, we can predict that: 1.Excess supply (relative to demand) leads to a decrease in Price 2.Excess demand (relative to supply) leads to an increase in Price.
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Adjustment in the Supply and Demand Model Our model predicts that in a pure market there will be no sustained surpluses or shortages.
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