Changes in market equilibrium, Microeconomics

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Changes in Market Equilibrium

Equilibrium prices are known by the associate level of supply and demand.

Supply and demand are decided by particular values of supply & demand determining variables.

Alteration in any one or combination of these variables can result in a change in the equilibrium price and/or quantity.

247_market equilibrium.png

Raw material prices fall 

– S moves to S’

– Surplus @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

1937_market equilibrium1.png

Raw material prices increases

– S moves to S’

– Shortage @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

108_market equilibrium2.png

Income Rises

P D D’ S

– Demand moves to D’ Shortage @ P1 of Q1, Q2

– Equilibrium @ P3, Q3

2042_market equilibrium3.png

Income Reduces

– Demand moves to D’

– Surplus @ P1 of Q1, Q2

– Equilibrium @ P3, Q3 

1046_market equilibrium4.png

Income Rises & raw material prices fall

– The increase in D is more than the increase in S

– Equilibrium price and quantity rise to P2, Q2

719_market equilibrium5.png

Income Increases & raw material prices decreases 

– The rise in D is less than the increase in S

– Equilibrium price reduce to P2and quantity rise to Q2

1010_market equilibrium6.png

Income Decreases & raw material prices decreases 

D’

– The decrease in D is more than the increase in S

– Equilibrium price and quantity lowers to P2 Q2

545_market equilibrium7.png

Income decreases & raw material prices decreases 

– The decrease in D is less than the rise in S

– Equilibrium price reduce  to P2 and quantity increase to Q2


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