Day 1

WEEK 4 (September 6 – 11, 2021)

CHAPTER I: Introduction to Applied Economics

Lesson Market Equilibrium

I

LEARNING OBJECTIVES:

 Compute for the demand and supply schedule and understand how the
demand and supply are influenced by price and other several factors.
 Determine the market equilibrium and the effect of disequilibrium.

Market Equilibrium
Words for Study!
QUANTITY DEMANDED = QUANTITY
SUPPLIED Market Disequilibrium –
shortage or surplus
As stated in the law and supply and demand, Quantity Demanded – total
market equilibrium happens when there is an amount of a good that consumers
equal demand and supply causing the price to demand over a given interval of
remain the same. When the supply is greater than time.
the demand it causes the price to decrease but Quantity Supplied – the number
when the demand is greater than the supply the of goods or services that suppliers
price increases. will produce and sell at a given
market price.

Equilibrium market price – price agreed by the buyer and seller.

 Figure 5 shows the equilibrium between the quantity demanded and quantity
supplied. It is the point of intersection between the supply and the demand curves. It
shows that the Equilibrium price (Pe) is 25 and the equilibrium quantity (Qe) is 140. It
means that if the price and quantity change there will be market disequilibrium
(shortage/surplus).

When the quantity supplied is greater than quantity demanded there will be
surplus. On the other hand, shortage is when the quantity demanded is greater than
quantity supplied.

Change in demand or supply may result to the changes in market equilibrium.

To protect the seller or the buyer when there is market disequilibrium the government
sets the minimum price (floor price) or maximum price (ceiling price) for some goods, this
is what we called price control.

Formula for Equilibrium Price

A. Complete the demand and supply schedule using the given demand and supply
functions: Qd=320−2P and Qs=−130+3P. Show your complete solution.

Quantity Demanded (Qs) Quantity Supplied (Qs)

Example: Example:
Qd=320−2P Qs= -130+ 3P
Qd=320- 2(50) Qs= -130+3(50)
Qd=320-100 Qs= -130+150
Qd= 220 Qs= 20
B. Plot the demand and supply curves in the same graph. Use different color for
each curve.

C. What is the equilibrium price (Pe) and equilibrium quantity (Qe)?