Transcript Equilibrium and Price Controls

Equilibrium
Definition
• Equilibrium: price and quantity where the supply of
a good and the demand for that good are equal
• (AKA Market Clearing Price)
• Example: Ms. Yeomans wants to buy 1 Starbucks
coffee at $4.75 and Starbucks wants to sell her 1
coffee at $4.75
Changes to Equilibrium
• If demand or supply change, equilibrium changes
– If Demand increases, equilibrium price and
quantity increase
– If Demand decreases, equilibrium price and
quantity decrease
– If Supply increases, equilibrium price decreases
and quantity increases
– If Supply increases, equilibrium price increases
and quantity decreases