Chapter sixteen Equilibrium
Chapter Sixteen Equilibrium
Market equilibrium eA market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers
Market Equilibrium ◆A market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers
Market equilibrium Market Market demand supply gEs(p) D(p*)=S(p*); the market is in equilibrium p qeD(p) q D(p), s(p)
Market Equilibrium p D(p), S(p) q=D(p) Market demand Market supply q=S(p) p* q* D(p*) = S(p*); the market is in equilibrium
An example D(p=a-bp S(p)=C+dp At the equilibrium price p*, D(p*)=s(p*). That is, a-bp =C+ dp which gives p b+d * a-c ad+ bc and q =D(p)=S(p)= b+d
An Example D(p) = a − bp S(p) = c + dp At the equilibrium price p*, D(p*) = S(p*). That is, a − bp = c + dp * * which gives p a c b d * = − + and q D p S p ad bc b d * * * = ( ) = ( ) = . + +
Market equilibrium e Can we calculate the market equilibrium using the inverse market demand and supply curves? e Yes. it is the same calculation
Market Equilibrium ◆Can we calculate the market equilibrium using the inverse market demand and supply curves? ◆Yes, it is the same calculation