1.5 Market Equilibrium, Disequilibrium, and Changes in Equilibrium

• At market equilibrium, the market price is stable.


  True
• The demand curve typically slopes downward.


  True
• Market equilibrium occurs when the quantity demanded by buyers equals the quantity supplied by sellers
• What does the supply curve represent?

  Price and quantity supplied
• Why does the demand curve slope downward?

  Lower prices increase demand
• At equilibrium, there is no surplus or shortage in the market.


  True
• During a shortage, the market price tends to rise.


  True
• The supply curve represents the relationship between the price of a good and the quantity supplied
• What is the relationship between the price of a good and the quantity demanded?

  Inverse
• At equilibrium, there is no surplus or shortage
• A shortage occurs when the quantity demanded exceeds the quantity supplied
• A shortage leads to a rise in the market price
• Match the factor with its effect on demand:

  Consumer Income ↔️ Higher income → Increase in demand

  Prices of Related Goods ↔️ Higher prices of substitutes → Increase in demand

  Consumer Tastes/Preferences ↔️ Increased preference → Increase in demand
• The new equilibrium in the example is at a price of $15 and a quantity of 300
• The equilibrium price is the price at which the quantity demanded equals the quantity supplied
• What are the two primary types of market disequilibrium?

  Surplus and shortage
• The demand curve typically slopes upward, indicating consumers buy more at higher prices.

  False
• The supply curve shows that higher prices lead to a higher quantity supplied
• The equilibrium price is graphically represented where the supply and demand curves intersect.

  True
• Market forces adjust prices back to equilibrium in both surplus and shortage scenarios.


  True
• What action do sellers take when there is a surplus of apples?

  Lower the price
• Improvements in technology shift the supply curve to the right.

  True
• What is market equilibrium?

  Balanced supply and demand
• Order the steps in the process of market equilibrium adjustment after a shift in demand

  1️⃣ Shift in demand curve

  2️⃣ Disequilibrium occurs

  3️⃣ Price adjusts

  4️⃣ New equilibrium reached
• Why does the supply curve slope upward?

  Higher prices encourage supply
• What happens to the equilibrium price if demand for smartphones increases?

  Increases
• A surplus occurs when the quantity supplied exceeds the quantity demanded
• Order the steps in the process of resolving a surplus in the market

  1️⃣ Excess supply of goods

  2️⃣ Sellers lower prices

  3️⃣ Demand increases

  4️⃣ Equilibrium is restored
• The supply curve typically slopes upward because producers are willing to supply more at higher prices
• What is the equilibrium price in a market?

  Price where supply equals demand
• What happens to the market price when there is a surplus of goods?

  It falls
• What is the effect of a surplus on the market price?

  Downward pressure
• Shifts in demand and supply curves can lead to changes in the equilibrium price
• How is the new market equilibrium found after shifts in supply and demand curves?

  Intersection of new curves