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EQUILIBRIUM IN THE VERY SHORT PERIOD (OR) MARKET PERIOD

ENGINEERING ECONOMICS & FINANCIAL ACCOUNTING CS FINAL YEAR & IT THIRD YEAR

Dr.K.Baranidharan
Present by

31-07-2013

Engineering Economics & Financial Accounting

MANAGERIAL ECONOMICS
31-07-2013 4

EQUILIBRIUM IN THE VERY SHORT PERIOD (OR) MARKET PERIOD

OP as the original market price, OQ the equilibrium quantity demanded and SS as the supply curve of mangoes. The supply curve of mangoes for example is fixed in the market period and the supply cannot be increased. When the demand for mangoes increase, demand curve DD shifts to D1D1.

The price of the mangoes goes up from OP to OP1 because the supply is fixes. The supply in the market continues to be SS though the demand has increased. Because the supply is fixed in the market period, the price rise when the demand increases.

When the demand decreases, the demand curve shifts to the left. Demand curve DD shifts to the left and its D2D2 is the new demand as a result, the price falls. Thus, demand decides the price in the market period as the supply is fixes and cannot be altered.

Dr.K.Baranidharan Thank you


K YOU

31-07-2013

31-07-2013

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