Charting Demand & Supply Price Quantity £3 4 16 £6 8 £4.50 14 £7.50 10 £12 Plot the above data on a graph At what price do these two lines intersect How much will be demanded at a price of £13.50 What is the consumer expenditure at the market equilibrium. What is the firm’s revenue at the market equilibrium.

Market Equilibrium or Market Clearing Price The market clears when there are no unsold stocks and no customers unable to buy the product. Price Quantity S D The equilibrium price is the price at which the amount of buyers demand and the amount sellers supply is exactly the same.

Equilibrium Market Price A state of equality between demand and supply in a market – at a state of rest – all parties are happy At P1, Qs > Qd  price will fall as suppliers try to dispose of the surplus stock At P2, Qd > Qs  price will rise as buyers are willing to pay a higher price to secure some stock. Movement comes to rest where D=S – called market equilibrium P P1 S Pe P2 D Q Qe

Disequilibrium in the market Equilibrium/Clearance price is when prices are likely to…… Surplus is when prices will…. Shortage is when prices will…..

There is an increase in the demand for fresh chicken (market for beef) What will happen to equilibrium price and quantity? Bad weather damages the Brazilian coffee crop (market for coffee at coffee shops in the UK) There is a large rise in unemployment (market for foreign package holidays) The Government raises petrol duty by 10% each year for five years (market for new cars) New firms enter the market for household gas supply (market for household gas) Technological progress increases output in the wheat farming industry (market for wheat) There is an increase in the demand for fresh chicken (market for beef) Holiday companies restrict the flights of holidays to areas deemed to be at threat from disease (market for package holidays) Wood pulp prices are increasing by 10% (market for newspapers) New companies enter the market for urban bus transport in Middlesborough (market for taxis in Middlesborough) The Bank of England announces a decrease in interest rates (market for houses)

Draw the Following… The Market for Gucci, following an increase in Average income. The Market for Sun Block, once Monsoon has started. The Market for Petrol, following an increase in the price of Crude Oil. The Market for Solar Panels, following the announcement of a Fixed Subsidy. Explain for each one whether it has caused a shift or movement for demand and supply.

Your Turn… In groups, think of examples of what could move either a demand of supply curve. Test each other using the ipads.