Equilibrium Market Prices Economics. The concept of the equilibrium price  Equilibrium means a state of equality between demand and supply D S.

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Presentation transcript:

Equilibrium Market Prices Economics

The concept of the equilibrium price  Equilibrium means a state of equality between demand and supply D S

Demand and Supply Schedules for Oil

The Market Equilibrium Price Quantity Demand P1 Q1 The normal free market equilibrium price is P1 and quantity is Q1 Supply

Excess Demand When Price is low there is EXCESS DEMAND Price Quantity Demand P1 Q1 Supply P2 Q2Q3

Excess Supply When Price is high there is EXCESS ________ Price Quantity Demand P1 Q1 Supply P3 Q2Q3

Shifts in market demand  Tell the person next to you, reasons why demand curve shifts outwards  Increased income..  Increased p__________  Tastes and F_________  Increased price of S___________  Decreased price of C__________

Changes in market demand Price Quantity D2 Supply P2 Q1 Price Quantity D1 Suppl y P1 Q1 D3 Q3 P3 D1 Q2 P1 An Outward Shift in DemandAn Inward Shift in Demand Demand for a product will increase if; Increased income

Changes in market demand Price Quantity D1 Supply P2 Q1 Price Quantity D1 Suppl y P1 Q1 D3 Q3 P3 D2 Q2 P1 An Outward Shift in DemandAn Inward Shift in Demand Demand for product will decrease if Decreased Income

Changes in market supply  Factors affecting Supply are????:  WAGE COSTS  T________ Costs  Raw material C_______  W________  Government tax and S________

Changes in market supply Price Quantity S1 Q1 Price Quantity D1 S1 P1 Q1 Q3 P3 D2 Q2 P1 An Outward Shift in Supply An Inward Shift in Supply S2 P2 S3 Increase supply if wages fall If transport costs __________

Changes in market supply Price Quantity S1 Q1 Price Quantity D1 S1 P1 Q1 Q3 P3 D2 Q2 P1 An Outward Shift in Supply An Inward Shift in Supply S2 P2 S3 DECREASE supply if wages increase If transport costs_________

Group Work  Match the diagram to the scenario

Draw Demand and Supply Diagrams

Shifts in market demand and market supply Price Quantity D1 S1 P1 Q1 Price Quantity D1 S1 P1 Q1 D3 Q2 P2 D2 Q2 P2 An Outward Shift in Demand and a Rise in Supply An Inward Shift in Demand and a fall in Supply S2