Transcript Quantity of DVDs (per week)

Equilibrium Price, Equilibrium
Quantity and the Interrelation of
Markets
Take-Away for the next few days



The forces of supply and demand work to
establish a price at which the quantity of goods
and services people will buy is equal to the
quantity suppliers will provide.
If supply or demand changes, equilibrium price
and quantity change.
Finally, the equilibrium price and quantity of a
good or service established by supply and
demand affect the equilibrium price and quantity
in other markets. Market prices determine what
to produce, how to produce and whom to
produce it for.
Equilibrium- State of balance between opposing forces. It
occurs because elsewhere there is a state of imbalance or
disequilibrium.
QS
QD
Surplus(+)
Shortage ()
$3.50
7
3
+4
$2.50
5
5
0
Price per DVD
Price
(per
DVD)
$5.00
Excess supply
4.00
S
3.50
3.00
E
2.50
2.00
1.50
$1.50
3
7
-4
Excess demand
1.00
1
2
3
4
5
6 7
Quantity of DVDs supplied and
demanded (per week)
D
8
Shifts in Demand and Supply

A. Increase in Demand
–
–
–

B. Decrease in Demand
–
–
–

D- decrease
P- decrease
Quantity supplied- decrease
C. Increase in Supply
–
–
–

D- increase
P- increase
Quantity supplied- increase
S- increase
P- decrease
Quantity demanded- increase
D. Decrease in Supply
–
–
–
S- decrease
P- increase
Quantity demanded- decrease
Increase in Demand
S0
B
$2.50
Excess demand
A
C
2.25
D0
0
D1
8
9
10
Quantity of DVDs (per week)
Decrease in Supply
S1
S0
C
$2.50
2.25
B
A
Excess demand
D0
0
8
9
10
Quantity of DVDs (per week)