ECON 1200 1st Edition Lecture 10- Competitive Market Equilibrium- A market equilibrium with many buyers and many sellerso At a competitive market equilibrium, all consumers willing and able to pay the equilibrium price will be able to buy as much of the product as they want, and all firms will be able to accept the equilibrium price and will be able to sell as much of the product as they want, so there is no reason for price to changeo Therefore a market in equilibrium remains in equilibrium holding all else equalo If there is a change in the market, then the market will move to a new equilibriumEXAMPLES:1. In the market for bologna, an inferior good, consumer income increases- We know that inferior goods decrease in demand when income increases- Price decreases, causing an increase in quantity demanded and a decrease in quantity supplied2. In the market for cars, sellers expect price to increase in the future- We know when sellers know price will rise, supply will decrease in the present- Price increases, causing a decrease in quantity demanded and an increase in quantity supplied3. In the market for DVD’s, DVD players, a complement, become cheaper- We know that when a complement decreases in price, the demand for the other good increases- Price increases, causing an increase in quantity supplied and a decrease in quantity demandedSurplus at original equilibriumShortage at original equilibriumShortage at original equilibrium4. In the market for baby diapers, the price of adult diapers, a substitute in production, decreases- We know that when a substitute in production decreases in price, you produce more of the other- Price decreases, which causes a decrease in quantity supplied and an increase in quantity demandedSurplus at original