Jun 21st, 2015
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Alabama State University
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Economics - Market EquilibiriumQs. What do youunderstandby Market Equilibirium?Apriceyou which both buyer and seller agree is called MarketPrice.As we know theconsumerwant cheaperpricefor thecommodityand seller want higherprice. But at apricefor which bothconsumerand seller agree is said to be Equilibirium in the market.E ----> Shows market Equilibirium.Po ---> is the Equilibiriumpricefor which bothconsumerand seller agree.consumeragree to buy at thispriceand seller agree for sale at thisprice.Qo ----> is the quantity demanded byconsumerat thispriceand quantity supplied by the supplies.Simply we define market Equilibirium at that bothconsumerand producer are satisfy for a fixedprice.Qs. Showthe effectsof change in Demand and Equilibirium Market?Find we assume that there is no change in supplyschedule.Now we analyse the effect of changes in demand or Equilibirium considering following type of Supply curve.1. Relatively Elastic Supply2. Relatively Inelastic Supply3. Perfectly Elastic Supply4. Perfectly Inelastic Supply1. Relatively Elastic SupplyE ------>InitialEquilibirium Pt in the market.Po ----->InitialEquilibirium Pt for which bothconsumerandproduceagreed.DD ----->InitialDemand Curve.Now Suppose demand Increase then DD will shift upward to the right D,D then as the market demand Increase in result producer increase thepriceand also increas

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