PRICE DETERMINATION OF A COMMODITY

CHANGES IN EQUILIBRIUM PRICE

&QUANTITY DUE TO CHANGES IN
DEMAND AND SUPPLY.
 KEY TERMS AND CONCEPTS
• Equilibrium Price:-The price at which the quantity
demanded and quantity supplied of a commodity are
equal.
• Equilibrium Quantity:-It is the quantity of the commodity
demanded and its quantity supplied at the equilibrium
price.
• Excess Demand:-A market situation in which the quantity
demanded of a commodity is more than the quantity
supplied.
• Excess Supply :-A market situation in which the quantity
supplied of a commodity is more than the quantity
demanded.
 KEY TERMS AND CONCEPTS
• Increase in Demand :- It is represented by a
rightward shift of the demand curve.
• Decrease in Demand:-It is represented by a
leftward shift of the demand curve.
• Increase in Supply:-It is represented by a
rightward shift of the supply curve.
• Decrease in Supply :- It is represented by a
leftward shift of the supply curve.
EQUILIBRIUM PRICE & EQUILIBRIUM
QUANTITY
DEMAND CONSTANT ,SUPPLY
INCREASES
SUPPLY CONSTANT ,DEMAND
INCREASES.
 VIDEOS
• https://www.youtube.com/watch?v=K0AQ9rK
8MN4 – Shift in Demand &Supply

• https://www.youtube.com/watch?v=OmHmD
pXXNVM –Equal change in demand &Supply.
SUPPLY CONSTANT,DEMAND INCREASES &
DECREASES
 Demand constant, supply
shifts(increases & decreases)
 Left:-Demand constant, supply increases and decreases.
Right:-Supply constant, demand increases & supply decreases.
 PRACTICE THE FOLLOWING CURVES

Find out equilibrium price and equilibrium

quantity, when
(i) Supply constant, demand increases.
(ii) Supply constant , demand decreases.
(iii)Demand constant, supply increases.
(iv) Demand constant, supply decreases.
(i)Supply constant ,Demand increases. (ii)Supply constant, demand
decreases.(iii)Demand constant, supply increases. (iv)Demand
constant, supply decreases.
Simultaneous and equal increase in
demand and Supply.Here price
constant, quantity changes.
Simultaneous increase in Demand and
Supply(supply increasing at faster rate)
 Demand & Supply increases equally.
Here price constant, quantity changes.
Left:-Demand increases, supply decreases but demand
increases faster than supply.
Right:-Supply decreases faster than demand increases.
 ASSIGNMENTS
• 1. Define equilibrium price and equilibrium quantity.
• 2. What do you mean by excess demand ? What is the impact
on the equilibrium output and price?
• 3.What is equilibrium price? What changes may take place in
the market when prevailing price is greater than equilibrium
price?
• 4.What happens to the equilibrium price of a good when
demand for that good increases?
• 5.What happens to the equilibrium price of a good when
supply of that good increases?
 Assignments
• 6. Changes in both demand and supply of a commodity may or may not
affect its equilibrium price. Explain.(with the help of a diagram).
7. Explain the effect of simultaneous decrease in demand and supply on
equilibrium price and quantity with the help of diagram.
8.How to following effect the equilibrium price and quantity?
Explain with the help of diagrams.
(i)A reduced in consumers’ income.
(ii)A change in consumer’s tastes in favour of the product.
(iii) An increase in the price of complementary goods.
9. Draw the diagrams for the followings;-
(i) Demand increases faster than supply.
(ii) (ii) Supply decreases faster than demand.