Transcript Changes in Market Equilibrium

Changes in Market
Equilibrium
In this lesson, students will identify
factors that can shift a market into
disequilibrium.
Students will be able to identify and/or
define the following terms:
Disequilibrium
Surplus
Shortage
If there are lots of apples in the market
and little demand for apples, market
disequilibrium occurs.
Let’s Review Equilibrium!
• Equilibrium occurs when quantity supplied
equals quantity demanded.
• Economists state that a market will tend
toward equilibrium.
• This means that price and quantity will
gradually move towards their equilibrium
levels.
Equilibrium is the point where the supply
curve intersects the demand curve.
Let’s Review Disequilibrium!
• Disequilibrium occurs when the quantity
supplied does not equal the quantity
demanded.
• Disequilibrium occurs when the price is not
right.
• If the price is too high or too low for that
particular market, disequilibrium occurs.
The original equilibrium price does not
work when the supply curve shifts.
Surplus
• A surplus occurs when quantity supplied is
greater than quantity demanded.
• Another term for surplus is excess supply.
• When a surplus occurs, the price must be
lowered to restore the market to
equilibrium.
Too many cookies and not enough
consumers creates a surplus.
Shortage
• A shortage is a situation in which quantity
demanded is greater than quantity
supplied.
• Another term for shortage is excess
demand.
• When a shortage occurs, prices must be
raised to restore the market to equilibrium.
When quantity demanded is created than
quantity supplied, a shortage occurs.
Prices
• Market disequilibrium occurs when the
price is not right for that particular market.
• If the price is too low for that particular
market, demand is encouraged and
shortage occurs.
• If the price is too high for that particular
market, demand is discouraged and
surplus occurs.
The beautiful thing about price is that
it can easily be changed to restore
equilibrium to the market.
Fortunately, price is flexible and market
equilibrium can be restored.
Questions for Reflection:
• How does equilibrium differ from
disequilibrium?
• Why do surpluses occur?
• Why do shortages occur?
• How can a market in disequilibrium be
restored to equilibrium?
• How must prices be changed to solve the
problems of surplus and shortage?