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MARKET EQUILIBRIUM (DEF (Happened when Qd = Qs, DD = SS, DD curves…
MARKET EQUILIBRIUM
DEF
Happened when Qd = Qs
DD = SS
DD curves intersect with SS
Curves
Surplus And Shortage
Surplus
Happened when Q supplied are greater than Q demanded.
Causing ; P decreases and the firm will reduce the output until it get equilibrium.
Shortage
Happened when Q demanded are greater than Q supplied.
Causing ; P increases and the firm will increase the output until it get equilibrium
Situation 3 ; Changes in Equlibrium P and Q
Situation 1
Changes at DD only
Increase in demand ( P increase, Q increase )
Decrease in demand ( P decrease, Q decrease )
Situation 2
Changes at SS only
Supply increases ( p decrease, Q increase )
Supply decrease ( P increase, Q decrease )
Changes both DD and SS
DD increases = SS increases ( P constant, Q increase )
Decreases DD = deceases SS ( P constant, Q decrease )
Increase DD = increase SS ( P decrease, Q constant )
Decreases DD = decreases SS ( P increase, Q constant )
DD increase > SS increase ( P increase, Q increase )
DD increase < SS increase ( P decrease, Q increase )
DD decrease > SS decrease ( P decrease, Q decrease )
DD decrease < SS decrease ( P increase, Q decrease)
