MARKET EQUILIBRIUM

Presented By – Subodh Mittal

 MARKET EQUILIBRIUM
Equilibrium refers to that state of
market in which quantity demanded
of a product equals the quantity
supplied
 In a free market, disequilibrium itself
creates the condition for equilibrium

Price per unit Qty Demanded Qty Supplied Market Position

10 120 0
20 100 20
30 80 40
40 60 60 Equilibrium
50 40 80
60 20 100
 DEMAND
In economics, demand is the
quantities of a commodity or
a service that people are
willing and able to buy at
various prices, over a given
period of time.
 SUPPLY
Supply is the amount of a
product per unit of time
that producers are willing
to sell at various given
prices when all other
factors are held constant.
 MARKET DISEQUILIBRIUM
0 EXCESS DEMAND - It is a
condition that exists when
quantity demanded exceeds
the quantity supplied at the
equilibrium price. It leads to
shortage in the economy.

0 EXCESS SUPPLY – It is a
condition that exists when
quantity supplied exceeds the
quantity demanded at the
equilibrium price. It leads to
surplus in the economy.
SHIFT IN DEMAND AND SUPPLY
CURVES
 Effect of shift in Demand curve
 Effect of shift in Supply curve
 Simultaneous and parallel shift in Demand and
Supply Curves
 Equal shift in demand and supply
 Bigger shift in demand than supply
 Bigger shift in supply than demand
 INCREASE IN DEMAND
0 Due to higher demand, the
demand curve shifts from D1
to D2
0 It leads to increase in
equilibrium price from P1 to
P2
0 Also it leads to increase in the
equilibrium quantity from Q1
to Q2
 INCREASE IN SUPPLY
0 Due to higher supply, the
supply curve shifts from S1 to
S2
0 It leads to decrease in
equilibrium price from P1 to
P2
0 But increase in the
equilibrium quantity from Q1
to Q2
 DECREASE IN DEMAND
0 Due to decrease in demand,
the demand curve shifts from
D1 to D2
0 It leads to decrease in
equilibrium price from P1 to
P2
0 Also it leads to decrease in
equilibrium quantity from Q1
to Q2
 DECREASE IN SUPPLY
• Due to decrease in
supply, the supply
curve shifts from S1 to
S2
• It leads to increase in
equilibrium price from
P1 to P2
• But it leads to decrease
in equilibrium quantity
from Q1 to Q2
THANK YOU