markets

Markets - PRICE DETERMINATION IN MARKETS The market demand curve shows the amount demanded at every price The market supply curve shows the amount

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Markets slide 1 PRICE DETERMINATION IN MARKETS The market demand curve shows the amount demanded at every price. The market supply curve shows the amount supplied at every price. The question now is whether there is some price at which the quantities supplied and demanded are the same.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Markets slide 2 EQUILIBRIUM PRICE DEFINED The equilibrium price of a good is: a price at which quantity supplied equals quantity demanded. a price at which excess demand equals zero. At the equilibrium price there is no net tendency for price to change.
Background image of page 2
Markets slide 3 Excess demand exists when, at the current price, the quantity demanded is greater than quantity supplied. Excess supply exists when, at the current price, the quantity supplied is greater than the quantity demanded.
Background image of page 3

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

View Full DocumentRight Arrow Icon
Markets slide 4 Excess supply = Q s - Q D Market for tacos supply demand price quantity p = $3 Q D Q S EXCESS SUPPLY EXCESS SUPPLY
Background image of page 4
Markets slide 5 Excess demand = Q D - Q S Market for tacos supply demand price quantity p = $1 Q D Q S EXCESS DEMAND EXCESS DEMAND
Background image of page 5

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

View Full DocumentRight Arrow Icon
Markets slide 6 When there is EXCESS DEMAND for a good, price will tend to rise. When there is EXCESS SUPPLY of a good, price will tend to fall.
Background image of page 6
Markets slide 7 When excess demand equals zero, price must be the equilibrium price, and we say the market is in equilibrium. If you want to find out the price at which a market is in equilibrium, then look for the price where the excess demand is zero.
Background image of page 7

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

View Full DocumentRight Arrow Icon
slide 8 Economists are interested in the explaining equilibrium prices. In particular, they are anxious to explain why
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/05/2012 for the course ECON 201 taught by Professor Brown during the Winter '12 term at BYU.

Page1 / 29

Markets - PRICE DETERMINATION IN MARKETS The market demand curve shows the amount demanded at every price The market supply curve shows the amount

This preview shows document pages 1 - 9. Sign up to view the full document.

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