Which Occurs During Market Equilibrium Check All That Apply In a competitive market, the equilibrium price is determined by the interaction of demand and supply for a particular good or service. Let’s explore the concepts of equilibrium, disequilibrium, and changes in equilibrium.
In a market, equilibrium is reached when the quantity demanded equals the quantity supplied, resulting in a stable price. This equilibrium point is represented on a graph where the demand and supply curves intersect.
Disequilibrium occurs when markets experience imbalances, leading to surpluses or shortages. A surplus happens when the price is above equilibrium, causing sellers to lower prices to reduce the surplus. Conversely, a shortage occurs when the price falls below equilibrium, prompting an increase in the price to meet demand.
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Changes in Equilibrium
Changes in the determinants of supply and demand can lead to shifts in equilibrium price and quantity. When supply or demand changes, the old price is no longer the equilibrium, resulting in either a shortage or surplus. Prices then adjust to establish a new equilibrium.
Key Graphical Models – The Market Model
Consider the market for giant shiny salamander stickers, as depicted in Figure [insert figure number].
Changes in Supply
Suppose the cost of a key component, glitter, used in making giant shiny salamander stickers increases. This leads to a decrease in supply. If you shift the supply curve to the left on the graph, you will observe that the equilibrium price increases.
Now, consider an alternative scenario
If a new, more efficient method of producing shiny salamander stickers reduces waste and resource usage, supply increases. Shifting the supply curve to the right results in a decrease in the equilibrium price.
Changes in Demand
Imagine a famous actress popularizing giant shiny salamander stickers, causing an increase in demand. When you shift the demand curve to the right, you will notice the equilibrium price and quantity both rise.
Changes in Both Demand and Supply
When both supply and demand change simultaneously, the impact on equilibrium price and quantity depends on the magnitude of the shifts. For instance, if demand decreases while supply also decreases, the quantity of giant shiny salamander stickers will decrease. However, the effect on price (increase, decrease, or no change) will be ambiguous.
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In conclusion : Which Occurs During Market Equilibrium Check All That Apply
When representing changes on a graph, ensure that you label equilibrium price and quantity clearly on the respective axes. When both supply and demand change simultaneously, it may not be possible to determine definitively how both price and quantity will be affected.