MARKET EQUILIBRIUM.

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Presentation transcript:

MARKET EQUILIBRIUM

Market Equilibrium Market Equilibrium is when the quantity demanded and the quantity supplied at a particular price are EQUAL. Equilibrium Price is the price at which the quantity demanded and the quantity supplied are equal.

Market Equilibrium SUPPLY DEMAND Equilibrium Price $6 $5.00 10 50 Price per Slice Quantity Demand Quantity Supplied $5.00 10 50 $4.00 20 40 $3.00 30 $2.00 $1.00 SUPPLY $5 $4 Equilibrium $3 DEMAND $2 $1 10 20 30 40 50 60 Quantity

Surplus A SURPLUS is when the quantity supplied is greater than the quantity demanded. Price SUPPLY DEMAND Quantity

How is the problem of a surplus solved? Suppliers lower the price Law of Supply takes effect, so suppliers… decrease supply Law of Demand takes effect, so consumers.. increase demand

Shortage SUPPLY DEMAND A SHORTAGE is the result of quantity demanded is greater than quantity supplied. Price SUPPLY DEMAND Quantity

How is the problem of a shortage solved? Suppliers raise the price Law of Supply takes effect, so suppliers… Increase supply Law of Demand takes effect, so consumers… Decrease demand