1. Market Equilibrium

2. Market Equilibrium
Equilibrium in a market occurs when the price balances the plans of buyers and plans of sellers.
The equilibrium price is the price at which the quantity demanded equals the quantity supplied.
The equilibrium quantity is the quantity bought & sold at the equilibrium price .

3. Price as a Regulator
The price of a good regulates the quantity demands and supplied.
If price is too low , the quantity demanded > the quantity supplied , and we have a shortage . The shortage bids up price till we reach equilibrium.
If price is too high , the quantity supplied > the quantity demanded , and we have a surplus . The surplus e bids down the price till we reach equilibrium.

4. A Figure Shows Equilibrium
P P2 P* P1 A Shortage q* Q D S
A Surplus

5. Market Equilibrium
Table p. 68 shows : The equilibrium price at which Qd = Qs Above the equilibrium price : Qs > Qd A surplus Below the equilibrium price : Qd > Qs A shortage

6. millions of bars per week
Shortage (−) Or
Surplus (+) Qs Qd
Price per unit
millions of bars per week
− 22 22
0.5
− 9 6 15 1 10
1.5 +6 13 7 2
+10 5
2.5

7. Price Adjustment A shortage forces the price up:
When there is a shortage ,producers raise the price. When price rises Qd decreases and Qs increases until we reach equilibrium.
A surplus forces the price down:
When there is a surplus ,producers cut the price. When price falls Qs decreases and Qd increases until we reach equilibrium.