Market: Put Buyers and Sellers Together

1
Market Put Buyers and Sellers Together
Price
Supply
At PC 4 QS QD How many sold?
4
2
1
Demand
Quantity
4
12
9
7
2
Market Put Buyers and Sellers Together
Price
Supply
At PC 4 QS 12 QD 4 Excess Supply How many
sold?
4
2
1
Demand
Quantity
4
12
9
7
3
Market Put Buyers and Sellers Together
Price
Supply
At PC 1 QS QD How many sold?
4
2
1
Demand
Quantity
4
12
9
7
4
Market Put Buyers and Sellers Together
Price
Supply
At PC 1 QS 7 QD 12 Excess Demand How many
sold?
4
2
1
Demand
Quantity
4
12
9
7
5
Market Put Buyers and Sellers Together
Price
Supply
At PC 2 QS QD How many sold?
4
2
1
Demand
Quantity
4
12
9
7
6
Market Put Buyers and Sellers Together
Price
Supply
At PC 2 QS 9 QD 9 Equilibrium How many
sold?
4
2
1
Demand
Quantity
4
12
9
7
7
Will A Market tend toward equilibrium?

• Examine cases of
• Excess Supply
• Excess Demand

Price
S
30
20
10
D
40
50
60
Quantity
8
Will A Market tend toward equilibrium?

• Examine cases of
• Excess Supply

Price
S
30
20
10
D
40
50
60
Quantity
9
Will A Market tend toward equilibrium?

• Examine cases of
• Excess Demand

Price
S
30
20
10
D
40
50
60
Quantity
10
Predictions

• How would an increase in petroleum prices affect
  the demand for SUVs? For Hybrid cars?

Price
S
P0
D
Q0
Quantity
11
Predictions

• How would a recession affect the price of land?

S
Price
P0
D
Q0
Quantity
12
Conclusions

• Markets tend toward equilibrium gt ability to
  predict price and quantity changes
• Shifts in demand and/or supply cause a change in
  equilibrium price, quantity
• At equilibrium, quantity demanded quantity
  supplied
• Sales maximized at equilibrium price
• At equilibrium, no incentive to adjust price,
  production