MARKET EQUILIBRIUM: When Supply 2.

Decide in which direction the curve

shifts.
Met Demand
3. Use the supply-and-demand diagram to
Unit Objectives: see how the shift changes the
◦ Relate how supply and demand interact equilibrium price and quantity.
and determine the market equilibrium;
◦ Discuss how demand and supply can be
applied; and
◦ Use tools of forecasting to determine
future demand.

EQUILIBRIUM
◦ Equilibrium Price
- market-clearing price
- price where QD = QS
◦ Equilibrium Quantity GOVERNMENT INTERVENTION IN MARKET
- QD = QS PRICES
◦ Price Ceiling
- a legal maximum on the price at which
a good can be sold
- e.g. rent, SRP, jeepney fares, NFA
rice

DISEQUILIBRIA
◦ Surplus - a situation in which
quantity supplied is greater than
quantity demanded
◦ Shortage - a situation in which
quantity demanded is greater than
quantity supplied GOVERNMENT INTERVENTION IN MARKET
PRICES
◦ Price Floor
- a legal minimum on the price at which
a good can be sold
- e.g. minimum wage, prices of
agricultural products

STEPS TO ANALYZING CHANGES IN MARKET

EQUILIBRIUM
1. Decide whether the event shifts the
supply or demand curve (or perhaps
both).