Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
MARKET EQUILIBRIUM
Equilibrium in the market will occur when PRICE balance the buying and selling plan
Or
Equilibrium in the market will determine when Quantity demanded is equal to the quantity
supplied at some specific price.
Price
(P)
7
6
5
4
3
2
1
Quantity
Demande
d
(Q d )
Quantit
y
Supplied
100
200
300
400
500
600
700
(Q s )
700
600
500
400
300
200
100
EQUILIBRIUM PRICE
Price at which Quantity demanded is equal to Quantity supplied
EQUILIBRIUM QUANTITY
Quantity which is demanded or supplied at Equilibrium Price
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
Effect of Change in Demand on Equilibrium Price and Equilibrium Quantity
When Demand increases, both equilibrium Price and Quantity increases
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
When Demand decreases, both equilibrium Price and Quantity decreases
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
Effect of Change in Supply on Equilibrium Price and Equilibrium Quantity
When Supply increases equilibrium Price decreases and Quantity Increases
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
When Supply increases equilibrium Price decreases and Quantity Increases
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
Application of Demand – Supply / Case Studies
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com
Lecture Notes: Business Economics
Market Equilibrium and Application of Demand and Supply
1. Afghanis migrated to Pakistan
2. News on Print and Electronic media about Bird Flu
3. Increase in Price of Eggs because of cold winds in Quetta
4. Beef Merchants went on Strike
5. Effect of Increase in Price of Beef on the price of Mutton
6. PTCL is expected to announce huge dividend
7. Continuous extraction of crude oil by Saudia Arabia with a removal on ban from Iran
8. Expected increase in the price of Gold
9. Expected increase in the Dollar exchange rate
10.
Prepared by: Dr Noman Saeed
Email: economanics@yahoo.com