Micro Unit 4: Model of Perfect Competition, Equilibrium

i
4 model of perfect impetition i e i e i e


eauiliBrium
equilibrium situation in which market pricehasreached thelevel at which quantity suppliedequals
equilibrium price price that balances quantity supplied quantity demanded
quantitydemanded
equilibriumquantity quantitysupplied quantity demanded at equilibriumprice

P
supply Qs Zp
Equilibrium5
Qa 20 zp
Equilibrium
price Qs Qd
i Demand 2p 20 zp
ii 2 5
a
p
Equilibrium on to
quantity

actionsof buyers sellersnaturallymore marketstowards equilibrium ofsupply I demand
i
if marketpricesequilibriumprice
quantity goods supplied exceeds demand
of surplusexcess
PP's unabletosellale at
P
x
surplus
dd o
supply
µ goingprice
s i cutpricesCiademanded d a supplied
i movements alongthe curves towards equilibrium
i
i ii Demand
i
Quantity
demanded ioauann.ba
supplied


2
if market
price equilibriumprice
quantity goodsdemand exceeds supplied
of snortacre demandersunableto buy all
demand
excess
is they want at goingprice
supply
Y demanded
5 raiseprices Io inasupplied
s e rip o movements
along curves towards equilibrium
shortage Demand
i i i
pep a Excessdemand
auanity
demanded
no auann.ba
supplied d
cheaper



shift in curves vs movements along curves

se
p shift in supply curve change in supply
Ssupply shift in demand curve 1 change in demand
me
ie D2
movement along change in quantitysupplied
fixed supply curve
p movement along fixed demand curve change in quantitydemanded
a
ieinitialequilibrium Idemand Tprice TQuantitysupplied but no change insupply
menewequilibrium supplys position in supply curve curve
quantity supplied amount suppliers wishtosell