Download Chapter 6 Equilibrium Surplus Shortage 11-14-11

11-14-11 Goal: Discover how
market equilibrium is reached.
Review: A market based economic system depends on
cooperation of consumers and producers
-Consumers goal (demand): is to purchase the best
products at the lowest prices
-Producers goal (supply): is to make profit and provide
products at the highest price possible.
Market Equilibrium-occurs when the quantity
demanded and the quantity supplied at a particular
price are equal
Equilibrium Price- is the price at which the quantity
demanded and the quantity supplied are equal.
Equilibrium Quantity-Is the quantity demanded and
supplied at the equilibrium price.
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Goal 2: Analyze what causes a surplus, shortage, and
disequilibrium.
Market equilibrium does not take place instantly. There is
a lot of trial and error before equilibrium is reached.
Surplus- is the result of quantity supplied of a product is
greater than quantity demanded. This is caused by a price
greater than market equilibrium price.
If there is a surplus, sellers will be forced to drop the price
to encourage buyers to take the surplus off the sellers
hands. The price would be pushed down to equilibrium.
Example: Outlet Malls
Shortage- Is the result of quantity demanded is greater
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than the quantity supplied. This is caused by a product's
price being below market equilibrium price.
If there is a shortage sellers will not be willing to make the
product available at that price. Competition among buyers
would drive the price back up to equilibrium.
Example: Christmas Toys (Wii, zhu-zhu pets)
Exit Question: What causes a surplus? What causes a
shortage?
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