1. MARKET EQUILIBRIUM

2. What is it?  When the supply of a product is equal to the demand of a product at a certain price.  This means that there is no excess demand or supply. That is, producers do not make more or less product than what consumers demand, at a certain price point.

3. The Pen Market PriceSupplyDemandDemand 2 $1.00105070 $2.00204060 $3.0030 50 $4.00402040 $5.00501030 Excess demand Excess supply D S

4. The Pen Market PriceSupplyDemandDemand 2 $1.00105070 $2.00204060 $3.0030 50 $4.00402040 $5.00501030 The demand curve shifts to the right. 1)This means there is an increase or decrease in demand? 2)What is the new equilibrium price? Is it higher or lower? 3)If firm refused to increase supply from the original equilibrium price would there be excess supply or excess demand. 4) By how much? D1 S D2

5. The Pen Market PriceSupplyDemand 2Demand 1 $1.00107050 $2.00206040 $3.00305030 $4.0040 20 $5.00503010 D1 S D2 An decrease in demand Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity D2

6. The Pen Market PriceSupplyDemandSupply 2 $1.00105030 $2.002040 $3.0030 50 $4.00402060 $5.00501070 D S1 S2An increase in supply Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity

7. The Pen Market PriceSupplyDemandSupply 2 $1.00105030 $2.002040 $3.0030 50 $4.00402060 $5.00501070 D S2 S1 An decrease in supply Lowers/ increases Equilibrium price and Raises/ lowers Equilibrium quantity