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DISEQUILIBRIUM 
(continued)
WARM UP: 
1. Write your name on the small piece of paper 
on your desk. 
! 
2. When I say “GO” - find 4 different partners: 
sign your names on each other’s paper next to 
one of the keywords: “opportunity cost,” 
“incentive,” and “demand.” 
! 
* You are not allowed to trade signatures with 
someone sitting next to you!
EQUILIBRIUM PRICE: 
The price where quantity 
demanded (Qd) is equal to 
quantity supplied (Qs). 
Q 
P 
We indicate 
equilibrium 
price with “P” 
and a “star”
EQUILIBRIUM QUANTITY: 
The quantity (Q) at which quantity 
demanded (Qd) and quantity supplied 
(Qs) are equal at a certain price (P). 
Q 
P 
We indicate 
equilibrium 
quantity with 
“Q” and a 
“star”
EQUILIBRIUM STATE: 
The combination of price (P) and 
quantity (Q) where there is no 
economic pressure from extra demand 
or extra supply. 
Q 
P
DISEQUILIBRIUM STATE: 
When the market is outside of 
equilibrium. In other words, when there 
is a surplus or shortage of goods. 
Qs 
P 
P 
Qd Qs 
Qd
Qs 
P 
Qd 
Answer the following 
(Don’t answer question: 
out loud!) 
Does this graph 
represent a 
a surplus or a 
shortage? 
Does this graph 
represent a 
a surplus or a 
shortage? 
and… 
and… 
How do you 
know? 
How do you 
know?
Qs 
P 
Qd 
Answer the following 
(Don’t answer question: 
out loud!) 
Does this graph 
represent a 
a surplus or a 
shortage? 
and… 
How do you 
know?
Answer the following questions: 
Classroom Projectors 
140 
120 
100 
80 
60 
40 
20 
100 500 1000 1500 
S 
D 
Q (in thousands) 
P 
What is the equilibrium price? 
What is the equilibrium quantity?
Answer the following questions: 
Name a price that would result in a shortage. 
Name a price that would result in a surplus. 
Classroom Projectors 
140 
120 
100 
80 
60 
40 
20 
100 500 1000 1500 
S 
D 
Q (in thousands) 
P
CONSUMER SURPLUS: (buyer) 
The benefit consumers receive from buying a 
good/service, measured by what the individuals 
would have been willing to pay minus the 
amount they actually paid. 
I wanted to buy an apple, and I was 
willing to pay $3.00 to get it. 
I bought an apple for $2.50! 
My consumer surplus for this 
purchase is .50¢
PRODUCER SURPLUS: (seller) 
The benefit producers receive from selling a 
good/service, measured by the price they 
actually received minus the price they would 
have been willing to accept. 
I wanted to sell an apple, and I was 
willing to sell it for $1.00. 
I sold an apple for $2.50! 
My producer surplus for this 
sale is $1.50
CONSUMER & 
PRODUCER 
SURPLUS: 
It doesn’t represent 
actual money we have 
saved or made, because 
the buyer has still spent 
money and the seller 
has not made any 
additional money. 
Instead, it’s a theoretical 
benefit we receive. 
We’re all happy 
because we have more 
money than we might 
have had if the 
transaction went differently
* An auction can potentially eliminate consumer 
surplus for the individual who wins.
P 
Q 
S 
D 
This area on the 
graph represents 
consumer surplus for 
the whole market 
This area on the 
graph represents 
producer surplus 
Both areas combined 
is called social surplus.
These are all the people demanding the product 
P 
Q 
S 
D 
at a price higher than equilibrium 
These are all the 
people willing to 
supply the product 
at a price 
lower than 
equilibrium
Q 
S 
D 
P2 
P 
! 
If the price is at equilibrium, 
All of the people who 
were willing to pay 
more have received a 
consumer surplus. 
A person willing to 
pay the higher price 
of P2 saved the 
difference between 
P2 and the 
current market price. 
!
Q 
S 
D 
If the producer was willing 
to sell at $50, but he 
sells at the price of 
100 
50 
$100, he receives 
a producer surplus of 
$50.
Answer the following question: 
Calculate the consumer and producer surplus in this sale: 
I sold a car 
for $13,500. 
! 
I was willing 
to sell it 
as cheap as 
$11,000! 
I bought a 
car for 
$13,500! 
! 
I was willing 
to buy it 
for up to 
$14,000.

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Disequilibrium Continued

  • 2. WARM UP: 1. Write your name on the small piece of paper on your desk. ! 2. When I say “GO” - find 4 different partners: sign your names on each other’s paper next to one of the keywords: “opportunity cost,” “incentive,” and “demand.” ! * You are not allowed to trade signatures with someone sitting next to you!
  • 3. EQUILIBRIUM PRICE: The price where quantity demanded (Qd) is equal to quantity supplied (Qs). Q P We indicate equilibrium price with “P” and a “star”
  • 4. EQUILIBRIUM QUANTITY: The quantity (Q) at which quantity demanded (Qd) and quantity supplied (Qs) are equal at a certain price (P). Q P We indicate equilibrium quantity with “Q” and a “star”
  • 5. EQUILIBRIUM STATE: The combination of price (P) and quantity (Q) where there is no economic pressure from extra demand or extra supply. Q P
  • 6. DISEQUILIBRIUM STATE: When the market is outside of equilibrium. In other words, when there is a surplus or shortage of goods. Qs P P Qd Qs Qd
  • 7. Qs P Qd Answer the following (Don’t answer question: out loud!) Does this graph represent a a surplus or a shortage? Does this graph represent a a surplus or a shortage? and… and… How do you know? How do you know?
  • 8. Qs P Qd Answer the following (Don’t answer question: out loud!) Does this graph represent a a surplus or a shortage? and… How do you know?
  • 9. Answer the following questions: Classroom Projectors 140 120 100 80 60 40 20 100 500 1000 1500 S D Q (in thousands) P What is the equilibrium price? What is the equilibrium quantity?
  • 10. Answer the following questions: Name a price that would result in a shortage. Name a price that would result in a surplus. Classroom Projectors 140 120 100 80 60 40 20 100 500 1000 1500 S D Q (in thousands) P
  • 11. CONSUMER SURPLUS: (buyer) The benefit consumers receive from buying a good/service, measured by what the individuals would have been willing to pay minus the amount they actually paid. I wanted to buy an apple, and I was willing to pay $3.00 to get it. I bought an apple for $2.50! My consumer surplus for this purchase is .50¢
  • 12. PRODUCER SURPLUS: (seller) The benefit producers receive from selling a good/service, measured by the price they actually received minus the price they would have been willing to accept. I wanted to sell an apple, and I was willing to sell it for $1.00. I sold an apple for $2.50! My producer surplus for this sale is $1.50
  • 13. CONSUMER & PRODUCER SURPLUS: It doesn’t represent actual money we have saved or made, because the buyer has still spent money and the seller has not made any additional money. Instead, it’s a theoretical benefit we receive. We’re all happy because we have more money than we might have had if the transaction went differently
  • 14. * An auction can potentially eliminate consumer surplus for the individual who wins.
  • 15. P Q S D This area on the graph represents consumer surplus for the whole market This area on the graph represents producer surplus Both areas combined is called social surplus.
  • 16. These are all the people demanding the product P Q S D at a price higher than equilibrium These are all the people willing to supply the product at a price lower than equilibrium
  • 17. Q S D P2 P ! If the price is at equilibrium, All of the people who were willing to pay more have received a consumer surplus. A person willing to pay the higher price of P2 saved the difference between P2 and the current market price. !
  • 18. Q S D If the producer was willing to sell at $50, but he sells at the price of 100 50 $100, he receives a producer surplus of $50.
  • 19. Answer the following question: Calculate the consumer and producer surplus in this sale: I sold a car for $13,500. ! I was willing to sell it as cheap as $11,000! I bought a car for $13,500! ! I was willing to buy it for up to $14,000.