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Market Equilibrium Price and Quantity (Changes in market equilibrium price…
Market Equilibrium Price and Quantity
Changes in market equilibrium price and quantity
2)
Shifts in Supply
1) Increase in supply
2) Decrease in Cost of production.
3) Quantity supplied exceeds quantity demanded.
4) Surplus results.
5) Causes downward pressure on price.
6) Producers unable to sell and compete by lowering prices.
7) Quantity supplied falls along the SS1 curve
8) Price falls and quantity demanded increases.
9) New equilibrium acieved
10) Quantity exchanged increased, price decreased
1)
Shifts in Demand
1) Shifts in demand
2) Rightward shift of DD to DD1
3) Quantity demanded exceeds quantity supplied
4) Shortage results.
5) Causes upward pressure on price as consumers compete to buy
6) Producers increase quantity supplied at higher prices.
7) New equilibrium achieved.
8) Both final price and quantity exchanged increased.
3)
Increase in both demand and supply
1) Rightward shift in both SS and DD curve.
2) Quantity exchanged increases.
3) Price indeterminate.
4)
Decrease in both demand and supply
1) Leftward shift in both SS and DD curve
2) Quantity exchanged decreases.
3) Price indeterminate.
5)
Increase in demand, decrease in Supply
1) Rightward shift of the DD curve causes quantity supplied to increase.
2) Leftward shift of the SS curve causes quantity supplied to decrease.
3) Price increased.
4) Quantity exchanged is indeterminate.
6)
Decrease in demand, increase in Supply
1) Leftward shift in the DD curve causes quantity supplied to decrease.
2) Rightward shift of SS curve causes quantity supplied to increase.
3) Price decreased.
4) Quantity exchanged is indeterminate.
Occurs at the intersection of the DD and SS curve.
Surplus
1) At prices above the equilibrium price, the quantity supplied exceeds the quantity demanded, resulting in a surplus.
2) Exerts a downward pressure on prices
Shortage
1) At prices below the equilibrium price, the quantity demanded exceeds the quantity supplied, resulting in a shortage
2) Exerts a upward pressure on prices
:warning:An equilibrium is a state where there is no tendency to change. The equilibrium of a market is determined by the market forces of demand and supply.