ECON 1 Lecture Notes - Lecture 7: Economic Equilibrium, Shortage, Demand Curve
Document Summary
Demanders have demand (they are willing to pay money to have things) suppliers have supply (they are willing to accept money to sell things) As long as there are demanders and suppliers, there will be markets (producers sell things to consumers) Market equilibrium: supply meets demand the equilibrium price is . Market is clear at (quantity supplied = quantity demanded) At the market equilibrium point, the quantity supplied equal the quantity demanded. The equilibrium is where the supply curve intersects the demand curve. At this point, consumers are willing to buy exactly what producers are willing to sell. At price of , quantity demanded is equal to quantity supplied. If there is no external force, equilibrium will not change. If the price is above equilibrium price, excess supply occurs and there is a surplus of the good or service. A lower price alleviates (ease up) the surplus. A surplus provides incentives for the price to decrease.
