Equilibrium, Microeconomics

Assignment Help:

Equilibrium is explained as follows:

Equilibrium is the state in which there are no shortages and surpluses; or we can say that the quantity demanded is equal to the quantity supplied.

Equilibrium price is the price prevailing at the point of intersection of the demand and supply curves; in other words, it is the cost at which the quantity demanded is equal to the quantity supplied.

Equilibrium quantity is the quantity which clears the market; or we can say that it is the quantity at which the quantity demand is equal to quantity supplied.

Algebraic Representation of Equilibrium is given below:

If we have the given demand and supply functions then,

Qd = 100 – 10 P

Qs = 40 + 20 P

In equilibrium, 

Qd = Qs

Therefore

100 - 10P = 40 + 20P

20P + 10P = 100 - 40

30P = 60

P = 60/30

 

P = 2

 Putting the value of cost in any of demand and supply equation,

Q = 100 – 10x2 (or 40 + 20x2)

Q = 100 – 20

Q = 80

The equilibrium price we obtain is 2 and the equilibrium quantity is 80.

Equilibrium can shift if any of the following happens:

The Demand Curve Shifts.

The Supply Curve Shifts.

Both the curves Shift.

The symbol “Æ” or “Ç” shows rise and the symbol “Å” and “È” shows a reduction while the symbol “~” shows that the particular thing remains same.


Related Discussions:- Equilibrium

Risk premium, Risk Premium - The risk premium is amount of money which ...

Risk Premium - The risk premium is amount of money which a risk averse person would pay to keep away from taking a risk. *  Risk Premium: A Scenario - The person has a 5%

Regulating skilled labour, 5 stratgies that can be used to regulate skilled...

5 stratgies that can be used to regulate skilled labour in developing countries

Explain the evolution of exchange rate system, Problem 1 (a) Explain th...

Problem 1 (a) Explain the evolution of exchange rate system in Mauritius. (b) According to you, what factors determine exchange rates in the long run? Problem 2 "Inf

Market systems, what is a perfect competition and how does it differ from m...

what is a perfect competition and how does it differ from monopoly?

What main features are found in oligopolies, What main features are found i...

What main features are found in oligopolies? Assumptions of oligopoly Four or five firm concentration ratio Frequently there are benefits of scale to be had Merg

Microeconomics and the market system, Suppose you are a painter, and the pr...

Suppose you are a painter, and the price of a gallon of paint increases from $3.00 a gallon t $3.50 a gallon. Your usage of paint drops from 35 gallons to 20 gallons a month. 1. Co

Determine the consumer surplus and the average price per cup, Suppose the d...

Suppose the demand curve for a consumer for coffee is: Q = 6 – 2P, where Q represents the number of cups per day and P is the price of coffee per cup.  Question: Sppose the co

Why the productivity growth slowdown of america in 1973, The Productivity G...

The Productivity Growth Slowdown However in 1973 steady trend of climbing rates of productivity growth stopped cold. Between 1973 and 1995 measured growth in output per worker

Mathematical approach to cost functions, Given that TC=1000+10Q-0.9Q^2+0.04...

Given that TC=1000+10Q-0.9Q^2+0.04Q^3,,Find the rate of output Q that result in minimum Average variable cost

What do you meant by hoarding, Q. What do you meant by Hoarding? A situ...

Q. What do you meant by Hoarding? A situation in that companies, financial investorsor individual consumers choose to hold hoards of cash or other liquid assets, instead of spe

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd