MARKET

EQUILIBRIUM
Objectives:
 Determine the concept of market
equilibrium,
 Graph the market demand and
market supply schedule,
 Appreciate the importance of
market equilibrium.
EXERCISE
 MARKET
EQUILIBRIUM
•Economists use the term
equilibrium to describe the balance
between supply and demand in the
marketplace.
Market equilibrium
•generally pertains to a balance that
exists when quantity demanded
equals quantity supplied.
Market equilibrium
Market equilibrium is the general
agreement of the buyer and the seller in
the exchange of goods and services at a
particular quantity.
Market equilibrium
Two sides of the story – seller and buyer

When buyers and sellers transact in a market

they agree on the price of the commodity and
the amount to be sold and bought, this agreed
price is called equilibrium price.
Market equilibrium
Market equilibrium
Market Disequilibrium
SURPLUS
SHORTAGE
 SURPLUS
•Surplus is a condition in the market where
the quantity supplied is more than the
quantity demanded, when there is surplus,
the tendency is for sellers to lower market
prices in order for the goods and services
to be easily disposed from the market.
Market equilibrium
 SHORTAGE
•Shortage is basically a condition in the
market in which quantity demanded is
higher than quantity supplied at a given
price. In particular, a shortage happens
when quantity demanded is greater than
quantity supplied.
Market equilibrium
Market equilibrium Exercise (DRESS)

PRICE QUANTITY QUANTITY

DEMANDED SUPPLIED

300 26,000 10,000

400 20,000 14,000
500 16,000 16,000
600 12,000 17,000
700 9,000 18,000
 EQUILIBRIUM
EQUATION

QS = Q D
SAMPLE
QS=-4+1P
Q =16-1P
D
SAMPLE
QS=20+2P
Q =100-3P
D
EXERCISE
Qd = 68 – 6P
Qs = 33 + 10P