Microeconomics · free preview
Market Equilibrium and the Invisible Hand
Where the demand and supply curves cross, price and quantity settle on their own, and any other price sets off shortage or surplus forces that push the market back.
1. The crossing point
The crossing point
2. Prices below equilibrium correct upward
Prices below equilibrium correct upward
3. Prices above equilibrium correct downward
Prices above equilibrium correct downward
4. Equilibrium in motion
Equilibrium in motion
5. Finding the equilibrium
A market has demand Q = 130 - 2P and supply Q = 4P, with Q in tons per week and P in dollars. What are the equilibrium price and quantity?
6. The pressure at a low price
In the honey market with demand Q = 120 - 2P and supply Q = 3P, the equilibrium price is 24 dollars. If the price currently sits at 16 dollars, what force pushes the market and in which direction?
7. The size of the shortage
A market has demand Q = 150 - 3P and supply Q = 2P. At a price of 20 dollars, compute the shortage, quantity demanded minus quantity supplied, and write the number.
8. Finding the crossing
A market has demand Q = 90 - P and supply Q = 2P. What are the equilibrium price and quantity?
9. Reading a shortage
In the same market, demand Q = 90 - P and supply Q = 2P, the price is stuck at 18 dollars. What happens?
10. The traded quantity
A market has demand Q = 150 - 3P and supply Q = 2P. Compute the equilibrium quantity, and write the number.
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