1.6 Market Equilibrium, Disequilibrium, and Changes in Equilibrium

Define (using graphs as appropriate) market equilibrium.

• Equilibrium is achieved at the price at which quantities demanded and supplied are equal.
• Enduring understanding MKT-2: In a competitive market, demand for and supply of a good or service determine the equilibrium price.

a. Define a surplus and shortage. b. Explain (using graphs as appropriate) how prices adjust to restore equilibrium in markets that are experiencing imbalances. c. Calculate (using graphs as appropriate) the surplus or shortage in the market experience an imbalance.

• Whenever markets experience imbalances—creating disequilibrium prices, surpluses, and shortages—market forces drive prices toward equilibrium.
• Enduring understanding MKT-2: In a competitive market, demand for and supply of a good or service determine the equilibrium price.

Explain (using graphs as appropriate) how changes in demand and supply affect equilibrium price and equilibrium quantity.

• Changes in the determinants of supply and/or demand result in a new equilibrium price and quantity.
• Enduring understanding MKT-2: In a competitive market, demand for and supply of a good or service determine the equilibrium price.