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Equilibrium Market Prices Economics. The concept of the equilibrium price  Equilibrium means a state of equality between demand and supply D S.

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Presentation on theme: "Equilibrium Market Prices Economics. The concept of the equilibrium price  Equilibrium means a state of equality between demand and supply D S."— Presentation transcript:

1 Equilibrium Market Prices Economics

2 The concept of the equilibrium price  Equilibrium means a state of equality between demand and supply D S

3 Demand and Supply Schedules for Oil

4

5 The Market Equilibrium Price Quantity Demand P1 Q1 The normal free market equilibrium price is P1 and quantity is Q1 Supply

6 Excess Demand When Price is low there is EXCESS DEMAND Price Quantity Demand P1 Q1 Supply P2 Q2Q3

7 Excess Supply When Price is high there is EXCESS ________ Price Quantity Demand P1 Q1 Supply P3 Q2Q3

8 Shifts in market demand  Tell the person next to you, reasons why demand curve shifts outwards  Increased income..  Increased p__________  Tastes and F_________  Increased price of S___________  Decreased price of C__________

9 Changes in market demand Price Quantity D2 Supply P2 Q1 Price Quantity D1 Suppl y P1 Q1 D3 Q3 P3 D1 Q2 P1 An Outward Shift in DemandAn Inward Shift in Demand Demand for a product will increase if; Increased income

10 Changes in market demand Price Quantity D1 Supply P2 Q1 Price Quantity D1 Suppl y P1 Q1 D3 Q3 P3 D2 Q2 P1 An Outward Shift in DemandAn Inward Shift in Demand Demand for product will decrease if Decreased Income

11 Changes in market supply  Factors affecting Supply are????:  WAGE COSTS  T________ Costs  Raw material C_______  W________  Government tax and S________

12 Changes in market supply Price Quantity S1 Q1 Price Quantity D1 S1 P1 Q1 Q3 P3 D2 Q2 P1 An Outward Shift in Supply An Inward Shift in Supply S2 P2 S3 Increase supply if wages fall If transport costs __________

13 Changes in market supply Price Quantity S1 Q1 Price Quantity D1 S1 P1 Q1 Q3 P3 D2 Q2 P1 An Outward Shift in Supply An Inward Shift in Supply S2 P2 S3 DECREASE supply if wages increase If transport costs_________

14 Group Work  Match the diagram to the scenario

15 Draw Demand and Supply Diagrams 123 45

16 Shifts in market demand and market supply Price Quantity D1 S1 P1 Q1 Price Quantity D1 S1 P1 Q1 D3 Q2 P2 D2 Q2 P2 An Outward Shift in Demand and a Rise in Supply An Inward Shift in Demand and a fall in Supply S2

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