Establisment of equilibrium (1 Viewer)

[dp23dwayne]

does anyone know how equilibrium will be established if there i a shortage or a surplus in the market?

 

[dp23dwayne]

what if there is a shortage?

 

[dp23dwayne]

do u know how the effect of a decrease in demand will have on equilibrium price and quantity?

 

[nick90]

A decrease in demand will shift the demand curve to the left. This will cause a contraction in supply. Market equilibrium price will be less, and the quantity demanded will be less.

 

[Demandred]

An equilibrium never establishes itself in a true sense, it's constantly moving.

 

[sk8ie_boi]

Umm so ... markets are never at a equilibrium, but only trying to reach that certain equilibrium point.

 

[onebytwo]

people, draw a diagram, make the shifts and look at the new equilibium (point of intersection). if you ever need to know what will happen in instances of shortages and surpluses, think of ebay. if, for example, their are 100,000,000 new iphones on sale (not on sale yet, and quite an extreme example), obviously extreme surplus, then obviously there arent going to be enough bidders for each of the items, rather the bids become evenly distributed, and the price is low. if on the other hand we have a rare item, britney spears' hair (real), then obviously the shortage (lots of willing buyers, few sellers), then lots of people bid on the same item, forcing the price up.

 

[gnrlies]

Economics has long sought the answer to these questions!

In looking at partial equilibrium for a one good model, you simply need to look at the comparative statics of the mathematical (or diagramatic - in the case of the HSC) model.

That does not necessarily mean its of any particular use apart from what we would like to think it explains