AS 90986: Consumer, producer and government choices using supply and demand.

Textbook Page 104 Market A market is any place or situation where buyers and sellers interact to exchange goods and services. A market is any place or situation where buyers and sellers can communicate and exchange goods and services. Market Demand The market demand is found by the horizontal summation of the individual demand curves, or demand schedules. Market demand measures the demand of all consumers for a product. This could mean everyone globally, nationally or in your neighbourhood.

Market Equilibrium We can represent the market using a Supply and Demand Model. We use the market demand curve to illustrate all the buyers, and the market supply curve to indicate all the sellers.

There is only one point on the graph that is acceptable to both consumers and producers. This point is the equilibrium point. The word equilibrium means stable, and therefore the equilibrium point of a market is a stable point in the market.

The equilibrium point gives us the equilibrium price and equilibrium quantity combination that is acceptable to both the producers and consumers. Equilibrium Price is labeled = Pe Equilibrium Quantity is labeled = Qe The market is NOT in equilibrium when the price is higher than the equilibrium price, nor when the price is lower than the equilibrium price. Textbook Page 114 & 115 Take your own notes under the following headings use graphs to illustrate your understanding. Prices higher than the equilibrium Prices lower than equilibrium Homework: Tuesday 03/09/13 - Homework Book: 132 & 133
(excess supply - surplus)

(excess demand shortage)