ECON 1100 1st Edition Lecture 5Outline of Previous LectureA Intro to markets Demand Reasons for change in demand Outline of Current LectureMarket Equilibrium • Supply and Demand Current Lecture- Market Equilibrium These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.*P* stands for market equilibrium*Q* stands for market equilibrium quantityMarket equilibrium occurs where quantity demanded = quantity supply What if current price (P1) is greater than the market equilibrium price (P*) What will get us back to equilibrium? In this case, manufacturers are willing to supply more of the product than consumers arewilling to buy Causing a surplus (Q^s1 -Q^D1) Lower price (sale), more demand Lower supply as well What if current price (P2) is less than the market equilibrium price (P*) In this case, manufacturers are not supplying as much of the product as consumers are willing to buyCausing a shortage (Q^D2 - Q^s2) Raise price, lose demand Change in Market Equilibrium Steps to dealing with it Determine whether to shift the demand curve, the supply curve, or both Which direction does the curve(s) shift? Use the supply and demand model to find the new equilibrium price and equilibrium quantity Suppose there is a change in demand (only) Suppose increase in demand (demand curve shits to right) • Demand increases, P and Q increasesSuppose decrease in demand Decrease in demand, P and Q decreases Suppose change in supply(only)sIncrease in supply Supply increases, P decreases and Q increases - Decrease in supply•Supply decreases, P increases and
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