Unformatted text preview: he
stands. On the other hand, suppose at
another game 2,500 people want to be at
the game but the stadium still has only 2,000
seats. Here we see a shortage of seats. Maybe
some people will have to stand, or some people will not be admitted to the game.
Back when the Soviet
Union existed (pre-1989), you could walk
around Moscow and find very few people in
some shops, but long lines of people inside
and outside of other shops. At the time,
Soviet officials set the prices of the goods
and services sold in the country. Often, the
prices they set were not equilibrium prices—
prices at which quantity demanded equaled
quantity supplied. Where the Soviet officials
set the price of a good higher than equilibrium price (say, 100 rubles is the equilibrium
price and officials set the price at 250 rubles),
there was a surplus of that good. This surplus
was evidenced by less of the good being purchased than was available for sale, and there- 132 Chapter 6 Price: Supply and Demand Together 50 100
Quantity fore, stores with few customers. Where the
Soviet officials set the price of a good lower
than equilibrium price (say, 100 rubles is the
equilibrium price and officials set the price at
30 rubles), there was a shortage of that good.
You could “see” a shortage in the form of a
long line of people waiting to buy a good that
was likely to be “sold out” before they
reached the front of the line. What Causes Equilibrium
Prices to Change?
You now know that equilibrium price is
determined by both supply and demand.
Can you guess what could cause an equilibrium price to change? You probably guessed
right—for the equilibrium price to change,
either supply or demand would have to
Before looking at changes to equilibrium
prices, let’s review your ability to read graphs
showing supply and demand curves.
Practice reading these graphs will help you
use graphs to determine shortages, surpluses, and ultimately, equilibrium prices.
Look at Exhibit 6-2....
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This document was uploaded on 01/16/2014.
- Winter '14