Study GuideEconomics–Demand, Supply, and Elasticity1. Equilibrium Analysis1.1What Is Market Equilibrium?In any market for a good (let’s call itgood X), buyers and sellers interact at the same time.•Buyersdecide how much they want to buy (demand).•Sellersdecide how much they want to sell (supply).The market is said to be inequilibriumwhen:•Quantity demanded = Quantity suppliedAt this point:•Theequilibrium priceis the price at which the market clears (no shortage or surplus).•Theequilibrium quantityis the amount bought and sold at that price.There aretwo main waysto find equilibrium:1.Algebraic method(using equations)2.Graphical method(using demand and supply curves)Preview Mode
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