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Lesson

SELLERS & BUYERS

FOCUS:

Market Equilibrium

Price Equilibrium

Quantity Equilibrium

Changes in Equilibrium

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Market Equilibrium

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Market Equilibrium

Equilibrium

-is a market condition where

quantity supplied equals quantitydemanded.

-It shows theAGREEMENTbetween the seller and buyers in terms

ofPrice and Quantity

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Market

-is the PLACE where the two

actors meet.

-it shows an ORGANIZED

TRANSACTION between the sellerand buyer.

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Price Equilibrium

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Price Equilibrium

Equilibrium Price

-it is the price that BOTHbuyers and sellers agree to have atransaction in the market

-How can the Price Equilibrium bedetermined?

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Howto determinePrice Equilibrium

Example:

Demand function:Qd= 83- 4P

Supply function:

Qs= -22+11P

QS=Qd

-22+11P=83-4P

Qd=83+22=QS=11p+4P

Qd=105=Qs=15P

105/15=7

Qd=Qs

83-4P=-22+11P83+22=11P+4P

105=15P

7=P

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Buyer(demand)

Seller(Supply)

Price Equilibrium

Market Interaction ofBuyerand Seller

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Quantity Equilibrium

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Quantity Equilibrium

Equilibrium Quantity

-refers to the quantity of products

that buyers and sellers are willing to transact

at a specified price.

How to determine quantity equilibrium?

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Howto determine quantity equilibrium?

Substitute the price in the demand and supply

function.

Example:

Qd=83-47=Qs=-22+11(17)

83-28=-22+17

55=55

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Market Equilibrium Schedule

Qd >Qs

-therefore we can

conclude that theconsumer is willing to

buy more than the

supplier is willing to sell.

This is called shortage.

Qd Price Qs

75 2 0

63 5 33

55 7 55

43 10 78

23 15 143

15 17 165

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Changes In Equilibrium

-any movement from supply and

demand affects the market equilibrium.

Factors that cause Changes in Equilibrium

-Change in Demand while Supply is constant

-Change in Supply while the Demand is

constant

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Change in Demand while Supply is

Constant

Any price above andbelow the

equilibrium indicatesthat there is noagreement betweenthe consumer andthe supplier,therefore noequilibria in themarket takes place

P

9

7

E2

S

E1

D1

D2

Q7055

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Change in Demand while Supply is

Constant

It indicates

decrease,therefore theprice will decrease in

order to sell the excess

supply.

P

7

9

S

E2

E1

D1 D2

Q120 30

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Changethe Supply whilethe Demand

isConstant

(a) Effect of Low Costs

of Production

Surplus

-The excess in supplyshown in the graph.

(b)Effectsof Calamities in

Supply

-It can cause adecrease in supply and

change in market

equilibrium.

P

Q

9

7

E2

s

D2D1

E1

300 350

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SimultaneousChangeofSupply and

Demand

E2

S2

S1

D

p

200150 Q

-The increase in

workers income and

low cost of production

show the simultaneous

change in supply and

demand curves

E15

10

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ShiftofBoth Supply and Demand

E2

S2

E2

S1

E1

E2

100

E2

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The End