3-5Equilibrium

3-5Equilibrium - Equilibrium The Interaction of Supply and...

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

View Full Document Right Arrow Icon
Equilibrium
Background image of page 1

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

View Full DocumentRight Arrow Icon
The Interaction of Supply and Demand The English historian Thomas Carlyle once said: “Teach any parrot the words supply and demand and you’ve got an economist.”
Background image of page 2
Equilibrium Equilibrium is a concept in which opposing dynamic forces cancel each other out.
Background image of page 3

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

View Full DocumentRight Arrow Icon
Equilibrium In a free market, the forces of supply and demand interact to determine equilibrium quantity and equilibrium price.
Background image of page 4
Equilibrium Equilibrium price – the price toward which the invisible hand drives the market. Equilibrium quantity – the amount bought and sold at the equilibrium price.
Background image of page 5

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

View Full DocumentRight Arrow Icon
What Equilibrium Isn’t Equilibrium isn’t a state of the world, it is a characteristic of a model. Equilibrium isn’t inherently good or bad, it is simply a state in which dynamic pressures offset each other.
Background image of page 6
What Equilibrium Isn’t When the market is not in equilibrium, you get either excess supply or excess demand, and a tendency for price to change.
Background image of page 7

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

View Full DocumentRight Arrow Icon
Excess Supply Excess supply – a surplus, the quantity supplied is greater than quantity demanded Prices tend to fall.
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 01/13/2012 for the course ECON 102 taught by Professor Mikejavanmard during the Fall '10 term at Harvard.

Page1 / 28

3-5Equilibrium - Equilibrium The Interaction of Supply and...

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