2.5: The Interaction of Markets

• Ceteris Paribus


  ‘All other things remaining equal’, allows for the isolation of other factors when considering the outcome of a decision
• Impact on demand when supply increases

  Demand decreases
• Impact on demand when supply decreases

  Demand increases
• Market equilibrium


  When the market price is such that the quantity demanded exactly equals quantity supplied
• Market disequilibrium


  When the market price is such that the quantity demanded doesn’t exactly equal the quantity supplied
• Causes for a change in market equilibrium

  Change in the determinants of demand and/or supply