EQUILIBRIUM

OF
SUPLY AND
DEMAND

 Market Equilibrium

 Computing for Equilibrium

 Effects of a Shift in Supply and Demand

Curves
MARKET EQUIIBRIUM
– It comes at the price and quantity where the forces of supply and
demand are in balance.
– It is where the amount that buyers want to buy is just equal to
the amount that sellers want to sell.
– It is the economic condition wherein there is neither shortage
nor surplus.
– It is when a quantity demanded equals to quantity supplied at a
given price.
 QD QS
PRICE
Quantity Demand Quantity Supply CAN YOU
GUESS WHERE
1 10 2 IS THE
MARKET
2 8 4 EQUILIBRIUM?

3 6 6

4 4 8

5 2 10
EQUILIBRIUM PRICE
– It is a price at which these demands and supply curves
cross

EQUILIBRIUM QUANTITY
– It is a quantity at which these demands and supply
curves cross
 QD QS
PRICE Quantity Quantity
Demand Supply
EQUILIBRIUM CHART
Price 🍎 SUPPLY DEMAND
6
3 6 6

EQUILIBRIUM PRICE 3

Quantity 🍎 0
2 4 6 8 10

EQUILIBRIUM QUANTITY
Price 🍎
EQUILIBRIUM CHART
SHORTAGE
SUPPLY DEMAND
6

It is when quantity
5 demanded is greater
than quantity supply.
4

0
2 4 6 8 10
Quantity 🍎
Price 🍎
EQUILIBRIUM CHART
SURPLUS
SUPPLY DEMAND
6

It is when quantity
5 supplied is greater than
quantity demand.
4

0
2 4 6 8 10
Quantity 🍎
Law of Supply and Demand
– If demand increases and supply remains unchanged, then it leads to
higher equilibrium price and lower quantity
– If demand decreases and supply remains unchanged, then it leads to
lower equilibrium price and higher quantity.
– If supply increases and demand remains unchanged, then it leads to
lower equilibrium price and higher quantity.
– If supply decreases and demand remains unchanged, then it leads to
higher equilibrium price and lower quantity.
Computing for Equilibrium
– Equilibrium Equation

QD = a - bP ; QS = w + vP
Where:
P =price
a, b, w and v = given constants

Find the equilibrium price based on the given equation:

QD = 30 - 2P ; QS = -10 + 3P
Computing for Equilibrium
Substitute the equation for its specific value:

QD = QS
a – Bp = -w + vP
30 – 2P = -10 +3P
-3P – 2P = -10 – 30
-5P = -40
-5P/ - 5 = -40/ -5

P=8
Effects of a Shift in Supply and
Demand Curves
Summary of the effect on price and quantity of different demand and supply shifts.

If demand rises…. The demand curve shifts to the right Price increase, Quantity increase

If demand falls…. The demand curve shifts to the left Price decrease, Quantity decrease

If supply rises…. The supply curve shifts to the right Price decrease, Quantity increase

If supply falls…. The supply curve shifts to the left Price Increase, Quantity decrease
QUIZ
True or False.
1. Market Equilibrium comes at the price and quantity where the forces supply and demand
are imbalanced.
2. Market Equilibrium is where the amount the buyers want to buy is just equal the amount
that sellers want to sell.
3. Market Equilibrium is the economic condition wherein there is neither shortage is neither
shortage a surplus.
Identification.
4. A situation in which quantity supplied is greater than quantity demand.
5. A situation in which quantity demanded is greater than quantity supplied
6. It claims that the price of any good adjust to bring the supply and demand of that good
into balance.
QUIZ
7. It is a price at which demand and supply curves cross.
8. It is a quantity at which these demands and supply curves cross.
Solve: Find the equilibrium price.
9-10. QD = 25 – 4P; QS = -15 + 5P
11-12. QD = 33 + 4P; QS = -48 + 13P
13-14. QD = 25 – 4P; QS = -15 + 5P
15. Bonus Question: How are you today?