PPT - Market Equilibrium | Economics Class 11 - Commerce PDF Download

 Page 1


Market 
Equilibrium 
            
Page 2


Market 
Equilibrium 
            
Supply and Demand Together
Equilibrium Price
? The price that balances supply and demand. On a graph, it is 
the price at which the supply and demand curves intersect.
Equilibrium Quantity
? The quantity that balances supply and demand. On a graph it is 
the quantity at which the supply and demand curves  intersect.  
Price Quantity
$0.00 0
0.50 0
1.00 1
1.50 4
2.00 7
2.50 10
3.00 13
Price Quantity
$0.00 19
0.50 16
1.00 13
1.50 10
2.00 7
2.50 4
3.00 1
Demand Schedule
Supply Schedule
At $2.00, the quantity demanded is equal to 
the quantity supplied!
Page 3


Market 
Equilibrium 
            
Supply and Demand Together
Equilibrium Price
? The price that balances supply and demand. On a graph, it is 
the price at which the supply and demand curves intersect.
Equilibrium Quantity
? The quantity that balances supply and demand. On a graph it is 
the quantity at which the supply and demand curves  intersect.  
Price Quantity
$0.00 0
0.50 0
1.00 1
1.50 4
2.00 7
2.50 10
3.00 13
Price Quantity
$0.00 19
0.50 16
1.00 13
1.50 10
2.00 7
2.50 4
3.00 1
Demand Schedule
Supply Schedule
At $2.00, the quantity demanded is equal to 
the quantity supplied!
Market Equilibrium 
? A market brings together those who are willing and able to supply
the good and those who are willing and able to purchase the good.
? In a competitive market, where there are many buyers and sellers,
the price of the good serves as a rationing mechanism.
? Since the demand curve shows the quantity demanded at each
price and the supply curve shows the quantity supplied, the point
at which the supply curve and demand curve intersect is the
point at where the quantity supplied equals the quantity
demanded. This is call the market equilibrium.
? Only in equilibrium is
quantity supplied equal
to quantity demanded.
? At any price level other
than P0, the wishes of
buyers and sellers do
not coincide.
Page 4


Market 
Equilibrium 
            
Supply and Demand Together
Equilibrium Price
? The price that balances supply and demand. On a graph, it is 
the price at which the supply and demand curves intersect.
Equilibrium Quantity
? The quantity that balances supply and demand. On a graph it is 
the quantity at which the supply and demand curves  intersect.  
Price Quantity
$0.00 0
0.50 0
1.00 1
1.50 4
2.00 7
2.50 10
3.00 13
Price Quantity
$0.00 19
0.50 16
1.00 13
1.50 10
2.00 7
2.50 4
3.00 1
Demand Schedule
Supply Schedule
At $2.00, the quantity demanded is equal to 
the quantity supplied!
Market Equilibrium 
? A market brings together those who are willing and able to supply
the good and those who are willing and able to purchase the good.
? In a competitive market, where there are many buyers and sellers,
the price of the good serves as a rationing mechanism.
? Since the demand curve shows the quantity demanded at each
price and the supply curve shows the quantity supplied, the point
at which the supply curve and demand curve intersect is the
point at where the quantity supplied equals the quantity
demanded. This is call the market equilibrium.
? Only in equilibrium is
quantity supplied equal
to quantity demanded.
? At any price level other
than P0, the wishes of
buyers and sellers do
not coincide.
Consumer
Surplus
Consumer Surplus
? Only the marginal consumer is willing to pay just the market
price in a typical supply and demand equilibrium.
? The consumers would be willing to pay more than the market
price are what makes the demand curve slope downward.
? The amount that these consumers would be willing to pay, but do
not have to pay is known as the consumer surplus.
Quantity 
Prices
Consumer Surplus:
The difference 
between  the 
demand curve 
(marginal benefit) 
and price (marginal 
cost)
Equilibrium Point
Page 5


Market 
Equilibrium 
            
Supply and Demand Together
Equilibrium Price
? The price that balances supply and demand. On a graph, it is 
the price at which the supply and demand curves intersect.
Equilibrium Quantity
? The quantity that balances supply and demand. On a graph it is 
the quantity at which the supply and demand curves  intersect.  
Price Quantity
$0.00 0
0.50 0
1.00 1
1.50 4
2.00 7
2.50 10
3.00 13
Price Quantity
$0.00 19
0.50 16
1.00 13
1.50 10
2.00 7
2.50 4
3.00 1
Demand Schedule
Supply Schedule
At $2.00, the quantity demanded is equal to 
the quantity supplied!
Market Equilibrium 
? A market brings together those who are willing and able to supply
the good and those who are willing and able to purchase the good.
? In a competitive market, where there are many buyers and sellers,
the price of the good serves as a rationing mechanism.
? Since the demand curve shows the quantity demanded at each
price and the supply curve shows the quantity supplied, the point
at which the supply curve and demand curve intersect is the
point at where the quantity supplied equals the quantity
demanded. This is call the market equilibrium.
? Only in equilibrium is
quantity supplied equal
to quantity demanded.
? At any price level other
than P0, the wishes of
buyers and sellers do
not coincide.
Consumer
Surplus
Consumer Surplus
? Only the marginal consumer is willing to pay just the market
price in a typical supply and demand equilibrium.
? The consumers would be willing to pay more than the market
price are what makes the demand curve slope downward.
? The amount that these consumers would be willing to pay, but do
not have to pay is known as the consumer surplus.
Quantity 
Prices
Consumer Surplus:
The difference 
between  the 
demand curve 
(marginal benefit) 
and price (marginal 
cost)
Equilibrium Point
Producer Surplus
? The marginal cost of producing a good is represented by the 
supply curve. 
? The price received by the sale of the good would be the marginal 
benefit to the producer, so the difference between the price and 
the supply curve is the producer surplus.
Quantity 
Prices
Equilibrium Point
Producer 
surplus
Producer surplus:-The 
difference between the 
price (marginal benefit) 
and the supply curve 
(marginal cost).