Commerce Exam > Commerce Videos > Market Equilibrium, Excess Demand and Excess Supply
Market Equilibrium, Excess Demand and Excess Supply Video Lecture - Commerce
FAQs on Market Equilibrium, Excess Demand and Excess Supply Video Lecture - Commerce
| 1. What is market equilibrium? |  |
Ans. Market equilibrium refers to the state in which the quantity demanded by consumers is equal to the quantity supplied by producers. It is the point where the demand and supply curves intersect, determining the equilibrium price and quantity in the market.
| 2. What happens when there is excess demand in the market? | |
Ans. Excess demand occurs when the quantity demanded by consumers exceeds the quantity supplied by producers at a given price. This situation leads to a shortage in the market, as consumers are unable to purchase all the goods they desire. In response, prices tend to increase as producers realize they can charge higher prices due to the imbalance between demand and supply.
| 3. What happens when there is excess supply in the market? | |
Ans. Excess supply occurs when the quantity supplied by producers exceeds the quantity demanded by consumers at a given price. This situation leads to a surplus in the market, as there are more goods available than consumers are willing to purchase. To address this surplus, producers may lower prices to encourage increased demand and reduce their excess inventory.
| 4. How is market equilibrium determined? | |
Ans. Market equilibrium is determined by the point where the demand and supply curves intersect. At this point, the quantity demanded by consumers matches the quantity supplied by producers, resulting in a stable equilibrium price and quantity. If there is a shift in either the demand or supply curve, the market will adjust to a new equilibrium point.
| 5. Can market equilibrium change over time? | |
Ans. Yes, market equilibrium can change over time due to various factors. Changes in consumer preferences, technology, input costs, government policies, and external shocks can all impact the demand and supply curves, leading to a shift in the market equilibrium. These changes can result in either a higher or lower equilibrium price and quantity, reflecting the new balance between demand and supply in the market.
Text Transcript from Video
the demand curve shows how the quantity
demanded changes if the price changes if
the price drops from five-round to 3r
and quantity demanded jumps from two
thousand four hundred to three thousand
six hundred our supply curve also based
on the information in the table shows
how the quantity supplied changes if the
price changes this price drop from five
to three R and causes the quantity
supplied to fall from three thousand six
hundred to two thousand four hundred
putting the two curves together we get a
picture of the state of the market the
demand curve reflects the behavior of
consumers and the supply curve the
behavior of suppliers we can see that
market equilibrium takes place at the
point whether two curves intersect at
the price of four-round where the
quantity demanded matches the quantity
supplied
three thousand pieces of fried chicken
at this point the plans of consumers
exactly match the plans of suppliers
note that in this market there is only
one possible equilibrium position also
known as the market clearing position
where everything that's produced is
consumed and both buyers and sellers are
satisfied at a price of six Rand and
excess supply exists and this excess
supply causes downward pressure on the
price and as the price declines the
quantity demanded increases and the
quantity supplied decreases this process
continues until equilibrium is reached
at a price of two Rand and excess demand
exists now this excess demand causes
upward pressure on the price and as the
price increases the quantity demanded
decreases and the quantity supplied
increases this process continues until
equilibrium is reached to summarize them
an excess supply forces sellers to
compete more aggressively putting
downward pressure on prices which
declines until market equilibrium is
reached
an excess demand in the market means
buyers will compete with one another to
get hold of the product and this forces
prices to rise until market equilibrium
is reached again so that's the market
model we're slowly getting better
equipped to understand the inner
workings of the markets in our economy
in the next episode we're going to use
these tools again we'll try to find out
what lies behind the often erratic and
turbulent changes in demand and supply
demanded changes if the price changes if
the price drops from five-round to 3r
and quantity demanded jumps from two
thousand four hundred to three thousand
six hundred our supply curve also based
on the information in the table shows
how the quantity supplied changes if the
price changes this price drop from five
to three R and causes the quantity
supplied to fall from three thousand six
hundred to two thousand four hundred
putting the two curves together we get a
picture of the state of the market the
demand curve reflects the behavior of
consumers and the supply curve the
behavior of suppliers we can see that
market equilibrium takes place at the
point whether two curves intersect at
the price of four-round where the
quantity demanded matches the quantity
supplied
three thousand pieces of fried chicken
at this point the plans of consumers
exactly match the plans of suppliers
note that in this market there is only
one possible equilibrium position also
known as the market clearing position
where everything that's produced is
consumed and both buyers and sellers are
satisfied at a price of six Rand and
excess supply exists and this excess
supply causes downward pressure on the
price and as the price declines the
quantity demanded increases and the
quantity supplied decreases this process
continues until equilibrium is reached
at a price of two Rand and excess demand
exists now this excess demand causes
upward pressure on the price and as the
price increases the quantity demanded
decreases and the quantity supplied
increases this process continues until
equilibrium is reached to summarize them
an excess supply forces sellers to
compete more aggressively putting
downward pressure on prices which
declines until market equilibrium is
reached
an excess demand in the market means
buyers will compete with one another to
get hold of the product and this forces
prices to rise until market equilibrium
is reached again so that's the market
model we're slowly getting better
equipped to understand the inner
workings of the markets in our economy
in the next episode we're going to use
these tools again we'll try to find out
what lies behind the often erratic and
turbulent changes in demand and supply
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Dec 16, 2024 Last updated |
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