Market Equilibrium

MARKET EQUILIBRIUM

• How market price and market quantity are determined.

DEFINITION OF MARKET EQUILIBRIUM

• When quantity demanded and quantity supplied are equal.

 Quantity Demanded (Qd) = Quantity Supply (Qs)

 

SHORTAGE When the price was set up below than equilibrium price ( Quantity demanded is greater that quantity supplied )

SURPLUS The price was set up above than equilibrium price (Quantity supplied is greater than the quality demanded)

MAXIMUM PRICE OR CEILING PRICE

• Government imposed regulations that prevent prices from rising above a maximum level set by the government which can lead to shortage

MINIMUM PRICE OR FLOOR PRICE

• Government imposed regulations that prevent price from falling below a minimum level set by the government which can lead to surplus.