Equilibrium

Equilibrium

What is equilibrium?
1. A price at which it is ensured that exactly everything that is produced (supplied) is purchased (demanded)
Equilibrium price and quantity are determined by demand and supply
It occurs on the Demand/Supply graph where the demand curve intersects with the supply curve
Excess Demand
1. This occurs when the price is below the equilibrium price - price is so low that the quantity demanded exceeds the quantity supplied
  1. Competition will eventually force price upwards towards equilibrium price
Excess Supply
1. This occurs when the price is set above the equilibrium price - the price is too high for all the quantity supplied to be purchased
  1. Eventually, excess supply will put downward pressure on the selling price
Changes in Demand
1. Increased Demand
  1. Results in an increase in equilibrium price and quantity
2. Decreased Demand
  1. Results in a decrease in equilibrium price and quantity

Resource summary

	Created by jackexamtime over 10 years ago

	Copied by eleanor.adamandi over 10 years ago