DEMAND, SUPPLY, and MARKET EQUILIBRIUM Appendix (chapter 3)

Equilibrium in a market A market demand curve shows the relationship between the quantity demanded and price, ceteris paribus. A market supply curve shows the relationship between the quantity supplied and price, ceteris paribus. Equilibrium in a market is shown by the intersection of the demand curve and the supply curve. When a market reaches equilibrium, there is no pressure to change the price.

Increases in Demand Shift the Demand Curve

Decreases in Demand Shift the Demand Curve

Increases in Supply Shift the Supply Curve

Decreases in Supply Shift the Supply Curve

A change in demand changes price and quantity in the same direction: An increase in demand increases the equilibrium price and quantity; a decrease in demand decreases the equilibrium price and quantity. A change in supply changes price and quantity in opposite directions: An increase in supply decreases price and increases quantity; a decrease in supply increases price and decreases quantity.

Predıctıng And Explaınıng Market Changes