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Equilibrium
Robin R. Santos, MBA
Bae101 Principles of Econ
August 1, 2017
Learning Objectives
1. How the demand curve summarizes the behavior of buyers in the marketplace.
2. How the supply curve summarizes the behavior of sellers in the marketplace.
3. How the supply and demand curves interact to determine the equilibrium price and quantity.
4. How shifts in supply and demand curves cause prices and quantities to change.
5. The relationship between individual demand and supply curves with market demand and supply
curves.
What, How, and For Whom?
WHAT -- Which goods will be produced? How much of each?
P
The quantity buyers would purchase at each
possible price
Willingness to pay at each possible price $4
Demand curve
Downward slope $2
Consumers buy less at higher prices D
Q
Consumers buy more at lower 8 16
prices
Demand
P
Horizontal interpretation of
demand. Given price, how much will
buyers buy? $4
Inverse relationship between the price of a good and the quantity buyers are
willing to purchase in a defined time period, ceteris paribus (all else remains
the same)
Supply Curve
The quantity of a good that sellers offer at each price
The supply curve reflects the willingness to sell
The supplier is willing to sell if the price covers the opportunity cost
Skills Expectations
No tendency to change P or Q
Buyers are on their demand curve
Sellers are on their supply curve
Market Equilibrium
Equilibrium = a price and a quantity
THANK YOU!