Market Equilibrium and Disequilibrium: Understanding Supply and Demand

This lecture covers the construction of demand and supply diagrams, the concept of market equilibrium, and how markets adjust to reach equilibrium. It begins with a recap of demand and supply curves, followed by a detailed explanation of market equilibrium, including its definition and characteristics. The lecture also discusses market disequilibrium, highlighting cases of excess demand and supply, and explains how prices adjust to restore equilibrium. The session concludes with a summary and a preview of the next unit on demand and supply shifts.

What is the primary learning objective of this lecture?

• To analyze consumer behavior

• To explore the history of economic thought

• To understand the concept of elasticity

• To learn about market equilibrium and how it is reached

According to the law of demand, what is the relationship between price and quantity demanded?

• No relationship

• Exponential relationship

• Direct relationship

• Inverse relationship

What does market equilibrium mean in economics?

• Prices are constantly changing

• Demand is greater than supply

• Supply is greater than demand

• Demand equals supply

What happens at the intersection of the demand and supply curves?

• Prices become unstable

• Market equilibrium is achieved

• Excess supply occurs

• Excess demand occurs

What is excess demand?

• When prices are too low

• When supply exceeds demand

• When demand exceeds supply

• When prices are too high

How do producers respond to excess supply in the market?

• By increasing production

• By reducing demand

• By raising prices

• By lowering prices

What is the result when producers raise prices in response to excess demand?

• Excess demand decreases

• Market equilibrium is disrupted

• Excess supply increases

• Demand remains constant