Rizal
Lesson for Week 7
Objectives: At the end of the lesson, you are expected to 1) Explain the basic concepts of equilibrium in your own words;
2) Summarize the importance of studying equilibrium analysis according to real world applications;
3) Compute the equilibrium prices and quantities of given equilibrium problems;
4) Distinguish a demand gap from a supply gap;
5) Plot demand and supply equations in a single Cartesian plane and highlight the occurrence of equilibrium, demand and supply gaps; and
6) Solve problems related to equilibrium analysis
BASIC CONCEPTS IN EQUILIBRIUM ANALYSIS After studying demand and supply concepts and their related equations and graphs, it is now time for us to learn about their greater significance in their respective roles at the heart of microeconomics: the market.
As mentioned in earlier lessons, unlike our common perception of a market ( or marketplace) being the place where several producers and vendors gather together to sell their products such as vegetables, fruits, meat, fish and others to people with baskets and market bags, microeconomics generally sees a market as composed of two main parties: the buyers (consumers) and the sellers (producers or suppliers). These buyers are represented in microeconomics as the demand side of the market, while all sellers and producers are collectively represented by the supply side of the market.
The dynamic interplay of the market results to what we call as transactions, where buyers and sellers agree on a certain price to consummate a transaction. Hypothetically, when all buyers and all sellers agree on the same price, we achieve what is termed as market equilibrium. At this point, it is expected that the agreeable price for both buyers and sellers are the same, and their respective quantity demanded and supplied are also the same, thus the term equilibrium.
We put it hypothetically, because more often than not, not all buyers
Objectives: At the end of the lesson, you are expected to 1) Explain the basic concepts of equilibrium in your own words;
2) Summarize the importance of studying equilibrium analysis according to real world applications;
3) Compute the equilibrium prices and quantities of given equilibrium problems;
4) Distinguish a demand gap from a supply gap;
5) Plot demand and supply equations in a single Cartesian plane and highlight the occurrence of equilibrium, demand and supply gaps; and
6) Solve problems related to equilibrium analysis
BASIC CONCEPTS IN EQUILIBRIUM ANALYSIS After studying demand and supply concepts and their related equations and graphs, it is now time for us to learn about their greater significance in their respective roles at the heart of microeconomics: the market.
As mentioned in earlier lessons, unlike our common perception of a market ( or marketplace) being the place where several producers and vendors gather together to sell their products such as vegetables, fruits, meat, fish and others to people with baskets and market bags, microeconomics generally sees a market as composed of two main parties: the buyers (consumers) and the sellers (producers or suppliers). These buyers are represented in microeconomics as the demand side of the market, while all sellers and producers are collectively represented by the supply side of the market.
The dynamic interplay of the market results to what we call as transactions, where buyers and sellers agree on a certain price to consummate a transaction. Hypothetically, when all buyers and all sellers agree on the same price, we achieve what is termed as market equilibrium. At this point, it is expected that the agreeable price for both buyers and sellers are the same, and their respective quantity demanded and supplied are also the same, thus the term equilibrium.
We put it hypothetically, because more often than not, not all buyers