Changes in market equilibrium, Microeconomics

Changes in Market Equilibrium

Equilibrium prices are known by the associate level of supply and demand.

Supply and demand are decided by particular values of supply & demand determining variables.

Alteration in any one or combination of these variables can result in a change in the equilibrium price and/or quantity.

247_market equilibrium.png

Raw material prices fall 

– S moves to S’

– Surplus @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

1937_market equilibrium1.png

Raw material prices increases

– S moves to S’

– Shortage @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

108_market equilibrium2.png

Income Rises

P D D’ S

– Demand moves to D’ Shortage @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

2042_market equilibrium3.png

Income Reduces

– Demand moves to D’

– Surplus @ P1 of Q1, Q2

– Equilibrium @ P3, Q3 

1046_market equilibrium4.png

Income Rises & raw material prices fall

– The increase in D is more than the increase in S

– Equilibrium price and quantity rise to P2, Q2

719_market equilibrium5.png

Income Increases & raw material prices decreases 

– The rise in D is less than the increase in S

– Equilibrium price reduce to P2and quantity rise to Q2

1010_market equilibrium6.png

Income Decreases & raw material prices decreases 


– The decrease in D is more than the increase in S

– Equilibrium price and quantity lowers to P2 Q2

545_market equilibrium7.png

Income decreases & raw material prices decreases 

– The decrease in D is less than the rise in S

– Equilibrium price reduce  to P2 and quantity increase to Q2

Posted Date: 7/24/2012 8:12:37 AM | Location : United States

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