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2 Application of Supply and Demand Analysis
2 Application of Supply and Demand Analysis
Demand Analysis
• Equilibrium Price
– When buyers and sellers transact in the market and
they agree on the price of the commodity and the
amount to be sold and bought
– See graph 2.7
• Disequilibrium
– Cases when there are disagreements among buyers
and sellers on the price and quantity (excess demand
and excess supply)
– See graph 2.8
Graph 2.7 Market Equilibrium
Graph 2.8 Excess Demand and Excess Supply
Changes in Equilibrium Price and Output