Concepts
- Surplus (Qs > Qd)
- Shortage (Qd > Qs)
- Equilibrium
- Equilibrium Price and Quantity on a Graph
- Characteristics of Equilibrium
- Allocative Efficiency
- Maximize Sum of Producer and Consumer Surplus
- Demand Shift’s Impact on Equilibrium Price and Quantity on a Graph
- Demand Shift: Direct Change to P and Q
- Conceptual Changes to P and Q
- Supply Shift’s Impact on Equilibrium Price and Quantity on a Graph
- Supply Shift: Inverse Change to P and Q
- Conceptual Changes to P and Q
- Interconnected Markets
- Complements: Inverse Relationship
- Substitutes: Direct Relationship
- Inputs: Derived Demand or Production Costs
- Double Shifts/Simultaneous Shifts
- One Indeterminate Variable
- One Predictable Variable
- Direct Change Between Demand and Supply: P = Indeterminate, Q = Predictable
- Inverse Change Between Demand and Supply: Q = Inderminate, P = Predictable
Overview
In this lesson about market equilibrium we combine the concepts of supply and demand on to one graph. We see that when equilibrium is not reached we have a market imbalance of either a surplus or a shortage. Over time however, the “invisible hand” of market forces will guide a market to equilibrium. Once equilibrium is reached, we learn how to identify the equilibrium price/quantity and we learn the characteristics of equilibrium that make it so important. Next, we learn about shifting supply and demand, and observing how the equilibrium values change. Then, we learn how markets can be interconnected and how a change in one market can create a large domino effect on other markets. The last concept we talk about is double shifting. We learn how a market is impacted when supply and demand shift simultaneously.
Materials
Lecture
Market Equilibrium Video
Market Equilibrium Lecture 1 Video
Market Equilibrium Lecture 2 Video
Quiz
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