Applied Economics for Engineers Prepared by Dr.

Kashif Noor

Course Title : Applied Economics for Engineers

Course Code : MF-303
Course Teacher : Dr. Kashif Noor
Handout : 04

Mathematical relationship b/w Price and Quantity SuppliedLaw of Supply

Here we have the supply equation

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Applied Economics for Engineers Prepared by Dr. Kashif Noor

Mathematical relationship b/w Price and Quantity demanded

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Applied Economics for Engineers Prepared by Dr. Kashif Noor

Market Equilibrium

𝑆𝑢𝑚 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡𝑠
=
𝑆𝑢𝑚 𝑜𝑓 𝑠𝑙𝑜𝑝𝑒𝑠

For Equilibrium Quantity

Equilibrium point is the best point at which the consumer and producer both are satisfied

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Applied Economics for Engineers Prepared by Dr. Kashif Noor

Case –a: If price is less than equilibrium price

• At low price : Qd > Qs

• Buyer want to buy more product than supplied by seller.
• The market shows a shortage, or lack of quantity supplied over quantity demanded.
• Under this condition the competition among buyers for limited goods, causes the price
to rise.

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Applied Economics for Engineers Prepared by Dr. Kashif Noor

Case-b: If price is high than equilibrium price

• At high price : Qs > Qd
• Surplus will occur
• suppliers want to sell more than demanders want to buy. The result is a surplus, or
excess of quantity supplied over quantity demanded.

NOTE :
• The equilibrium price is a price at which quantity demanded is equal to the quantity
supplied over the same period.
• At equilibrium point, there are no shortages or surpluses; there is no tendency for price
to rise or fall, means the forces of supply and demand are in balance and the price has
settled at a sustainable level.
• Equilibrium point is the best point at which the consumer and producer both are
satisfied.

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