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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
Demand and Supply Schedules for Oil
Price Per Unit Quantity Demanded Quantity Supplied
($) Million Barrels Per Day Million Barrels Per Day
20 50 75
19 52 72
18 54 69
17 56 66
16 58 63
15 60 60
14 62 57
13 64 54
12 66 51
11 68 48
10 70 45
9 72 42
8 74 39
Demand and Supply Schedules for Oil
Price Per Unit Quantity Demanded Quantity Supplied
($) Million Barrels Per Day Million Barrels Per Day
20 50 75 Excess Supply
19 52 72
18 54 69
17 56 66
16 58 63
15 60 60 Market Equilibrium
14 62 57
13 64 54
12 66 51
11 68 48
10 70 45
9 72 42
8 74 39 Excess Demand
The Market EquilibriumPrice
Quantity
Demand
P1
Q1
The normal free market equilibrium
price is P1 and quantity is Q1
Supply
Excess DemandWhen Price is low there is EXCESS
DEMAND Price
Quantity
Demand
P1
Q1
Supply
P2
Q2 Q3
Excess SupplyWhen Price is high there is EXCESS
________Price
Quantity
Demand
P1
Q1
Supply
P3
Q2 Q3
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__________
Changes in market demand
Price
Quantity
D2
Supply
P2
Q1
Price
Quantity
D1
Supply
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
Changes in market demandPrice
Quantity
D1
Supply
P2
Q1
Price
Quantity
D1
Supply
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
Changes in market supply
Factors affecting Supply are????:
WAGE COSTS T________ Costs Raw material C_______ W________ Government tax and S________
Changes in market supply
Price
Quantity
S1
Q1
Price
Quantity
D1
S1
P1
Q1 Q3
P3
D2
Q2
P1
An Outward Shift in SupplyAn Inward Shift in Supply
S2
P2
S3
Increase supply if wages fall
If transport costs __________
Changes in market supply
Price
Quantity
S1
Q1
Price
Quantity
D1
S1
P1
Q1 Q3
P3
D2
Q2
P1
An Outward Shift in SupplyAn Inward Shift in Supply
S2
P2
S3
DECREASE supply if wages increase
If transport costs_________
Group Work
Match the diagram to the scenario
Draw Demand and Supply Diagrams
1 2 3
4 5
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
S2