Index
The Demand Curve 1
The Demand Curve 2
The Demand Curve 3
The Laws of Supply and Demand - 4
The Laws of Supply and Demand - 5
A ''Contraction'' of Demand - 6
''Ceteris Paribus'' - 7
An ''Expansion'' of Demand - 8
Marginal Utility - 9
Marginal Utility - 10
Marginal Utility - 11
Marginal Utility - 12
Consumer Surplus - 13
Consumer Surplus - 14
Price Discrimination - 15
An ''Expansion'' of Supply - 16
An ''Expansion'' of Supply - 17
Market Equilibrium - 18
Market Equilibrium - 19
Market Equilibrium - 20
Movements of the Demand Curve - 21
Movements of the Demand Curve - 22
Movements of the Demand Curve - 23
Inferior Goods - 24
Movements of the Demand Curve - 25
Movements of the Supply Curve - 26
Movements of the Supply Curve - 27
Movements of the Supply Curve - 28
The Income Effect - 29
The Substitution Effect - 30
The Substitution Effect - 31
The Substitution Effect - 32
The Substitution Effect - 33
Complements - 34
Complements - 35
Review: Factors Effecting Demand - 36
Review: Factors Effecting Demand - 37
The Goals of Firms - 38
The Goals of Firms - 39
To: Elasticity

Market Equilibrium - 20

In most markets, the competing desires of consumers and suppliers help to establish an equilibrium price (Shown here as the point E.)

Firms monitor their level of stocks, and adjust prices.

What firms want is to sell all of their stocks just before the next delivery, or production run. Consumers are always looking for the lowest price, at a given level of quality.

Our butcher has discovered, by trial and error, that consumers will buy 100 kg of beef per week at a price of $8 per kilogram. If our butcher can supply beef at this price, and make a profit, he will remain in the market.

We can summarise this dynamic (''moving'') process : if Supply is greater than Demand, a surplus (or ''excess supply'') develops and prices tend to fall.

If Demand is greater than Supply, a shortage develops and prices tend to rise.