Macroeconomics Market Equilibrium
Macroeconomics Market Equilibrium Economics 111
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This 2 page Class Notes was uploaded by amber weiss on Monday February 15, 2016. The Class Notes belongs to Economics 111 at Southern Illinois University Edwardsville taught by Mary Anne Pettit in Spring 2016. Since its upload, it has received 21 views. For similar materials see Macroeconomics in Economcs at Southern Illinois University Edwardsville.
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Date Created: 02/15/16
Economics Macroeconomics Market Equilibrium Marstt Equilibrium 1 : Equilibrium Price and Quantity 2 : Shifts in supply and Demand 3 : Real World Applications Market equilibrium - How is a price determined? Interaction between supply and demand - Need to “fine-tune” this question- We’re interested in not every price but an equilibrium price - How is an equilibrium price determined? A price once achieved will tend to be sustained – no tendency to change (ceteris paribus) - One place where Qd=Qs, NOT supply=demand, that would only make one line and not an intersection Equilibrium price Qd=Qs Price Qd (P) $5 10 $4 20 Price (P) Qs $3 35 $2 55 5$ 60 4$ 50 $1 80 3$ 35 The equilibrium 2$ 20 price is at $3 1$ 5 - Price decreases, Quantity demanded increases [CONSUMER] - Price increases, Quantity supplied decreases [PRODUCER] - Qd= Qs at $3 - Prices Above Equilibrium… At $5 Qd= 10lbs and Qs= 60lbs At $4 Qd= 20lbs and Qs= 50lbs - Prices Below Equilibrium… At $1 Qd= 80lbs and Qs= 5lbs - Qd exceeds Qs “shortage” Pushes prices up Movement of Equilibrium - Equilibrium price/quantity - It makes an X or an intersection S The BIG BLUE CIRCLE represents the equilibrium/ intersection. [$3,35] In equilibrium, there are no shortages or surpluses What if a price is above equilibrium? It is a surplus What if it is below? Shortage Surplus: Qs exceeds Qd- downward pressure on prices- movement to equilibrium- rationing function of prices Shortage: Qd exceeds Qs- upward pressure on prices- movement to equilibrium- rationing function of price- let price take care of it…
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