The document discusses market equilibrium and how it is impacted by changes in supply and demand. It begins by defining key market concepts like markets, buyers, sellers, supply and demand. It then explains how equilibrium price and quantity are determined by the intersection of the supply and demand curves. The rest of the document analyzes how equilibrium changes when supply or demand increases or decreases, such as equilibrium price and quantity both rising when demand increases. It also discusses government interventions in markets, such as setting maximum or minimum prices.

1. 14
00
€
market
equilibrium
(c) Nikos Kokolis, 2012

3. markets
(c) Nikos Kokolis, 2012

4. direct exchange of goods & services
markets
Division of Labor
market
Barter
Barter’s area
(c) Nikos Kokolis, 2012

5. (c) Nikos Kokolis, 2012
market
physical
virtual
trade
stock exchange local farmers’ market
mall
telephone
internet
fax
markets

6. markets
sellers
firms
profit
maximization
(c) Nikos Kokolis, 2012

7. markets
buyers
consumers
utility
maximization
data
preferences
income
etc.
(c) Nikos Kokolis, 2012

8. markets
buyers
consumers
sellers
firms
market
trade
Satisfaction of both 2
(c) Nikos Kokolis, 2012

10. market equilibrium
Price
(€)
Quantity
supplied
(kg)
60 37
50 35
40 30
30 20
20 10
10 3
Supply table
Supply table
(c) Nikos Kokolis, 2012

11. market equilibrium
Price
(€)
Quantity
demanded
(kg)
60 5
50 8
40 13
30 20
20 35
10 50
Demand table
Demand table
(c) Nikos Kokolis, 2012

12. Price
(€)
Quantity
demanded
(kg)
Quantity
supplied
(kg)
excess
supply
(kg)
excess
demand
(kg)
60 5 37
50 8 35
40 13 30
30 20 20
20 35 10
10 50 3
32
27
17
0 0
25
47
surplus shortage
market equilibrium
(c) Nikos Kokolis, 2012

13. price
(€)
Quantity
demanded
(kg)
Quantity
supplied
(kg)
60 5 37
50 8 35
40 13 30
30 20 20
20 35 10
10 50 3
0
10
20
30
40
50
60
P
QD
10 20 30 40 50 60
D S
32
27
17
25
47
surplus
shortage
market equilibrium
E
(c) Nikos Kokolis, 2012

14. QD=QS
Example
Example
QD=280-2PQD=280-2P
QS=100+1,6PQS=100+1,6P
QD=QS
QD=QS 280-2P=100+1,6P 3,6P=180 P0=50P0=50
P0
=50P0
=50
QD=280-2*50QD=280-2*50 QD=180QD=180
QS=100+1,6*50QS=100+1,6*50 QS=180QS=180
Q0=180Q0=180
algebraic determination of the equilibrium level
ή ήή
(c) Nikos Kokolis, 2012

15. (P0, Q0)=(50, 180)
algebraic determination of the equilibrium level
Equilibrium
level
(c) Nikos Kokolis, 2012

17. The effects on equilibrium
price & quantity
(c) Nikos Kokolis, 2012

18. The effects on equilibrium price & quantity
P
Q
0
S
D1
E1P1
Q1
Q2
P2 E2
D2
> Increase in Demand
D
S
(c) Nikos Kokolis, 2012

19. P
Q
0
SD1
E1P1
Q1Q2
P2 E2
D2
D
S
> Decrease in DemandThe effects on equilibrium price & quantity
(c) Nikos Kokolis, 2012

20. SP
Q
0
S1
E1
P1
Q1 Q2
P2 E2
D
D
S2
The effects on equilibrium price & quantity
> Increase in Supply
(c) Nikos Kokolis, 2012

21. SP
Q
0
S1
E1P1
Q1Q2
P2
E2
D
D
S2
The effects on equilibrium price & quantity
> Decrease in Supply
(c) Nikos Kokolis, 2012

22. P
Q
0
S1
D1
E1
P1
Q1 Q2
P2
E2
D2
Δ(D1
D2
) > Δ(S1S2)
D
SS2Δ (D1D2)
Δ
(S
1S
2)
The effects on equilibrium price & quantity
> Increase in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

23. Δ
(D
1 D
2 )
P
Q
0
S1
D1
E1
P2
Q1 Q2
P1
E2
D2
Δ(D1
D2
) < Δ(S1S2)
D
SS2
Δ (S1S2)
The effects on equilibrium price & quantity
> Increase in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

24. Δ
(D
1 D
2 )
Δ
(S
1S
2)
P
Q
0
S1
D1
E1
P1
Q1 Q2
E2
D2
Δ(D1
D2
) = Δ(S1S2)
D
SS2
The effects on equilibrium price & quantity
> Increase in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

25. Δ
(S 1
S 2
)
P
Q
0
S1D2
E2
P1
Q1Q2
E1
D1
Δ(D1
D2
) > Δ(S1S2)
D
S
S2
P2
Δ
(D
1D
2)
The effects on equilibrium price & quantity
> Decrease in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

26. Δ
(D
1 D
2 )
P
Q
0
S2
D2
E2
P1
Q2 Q1
P2
E1
D1
Δ(D1
D2
) < Δ(S1S2)
D
S
S1
Δ (S1S2)
The effects on equilibrium price & quantity
> Decrease in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

27. Δ
(S 1
S 2
)
E2
P
Q
0
S1
D2
P1
Q1Q2
E1
D1
Δ(D1
D2
) = Δ(S1S2)
D
S
S2
Δ
(D
1 D
2 )
The effects on equilibrium price & quantity
> Decrease in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

28. E2
Δ
(S
1S
2)
P
Q
0
S1
D2
P1
Q1 Q2
E1
D1
Δ(D1
D2
) > Δ(S1S2)
D
S
S2
Δ (D1
D2
)
P2
The effects on equilibrium price & quantity
> Increase in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

29. E2
Δ
(S
1S
2)
P
Q
0
S1
D2
P1
Q1Q2
E1
D1
Δ(D1
D2
) < Δ(S1S2)
D
S
S2
Δ
(D
1 D
2 )
P2
The effects on equilibrium price & quantity
> Increase in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

30. E2
Δ
(S
1S
2)
P
Q
0
S1
D2
P1
Q1
E1
D1
Δ(D1
D2
) = Δ(S1S2)
D
S
S2
Δ
(D
1 D
2 )
P2
The effects on equilibrium price & quantity
> Increase in Demand &
Decrease in Supply
(c) Nikos Kokolis, 2012

31. Δ (D1D2)
Δ
(S
1S
2)
E2
P
Q
0
S1
D2
P1
Q1Q2
E1
D1
Δ(D1
D2
) > Δ(S1S2)
D
SS2
P2
The effects on equilibrium price & quantity > Decrease in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

32. Δ (S1
S2
)
E2
P
Q
0
S1
D2
P1
Q2Q1
E1
D1
Δ(D1
D2
) < Δ(S1S2)
D
S
S2
Δ
(D
1 D
2 )
P2
The effects on equilibrium price & quantity > Decrease in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

33. Δ
(S
1S
2)
E2
P
Q
0
S1
D2
P1
Q1
E1
D1
Δ(D1
D2
) = Δ(S1S2)
D
SS2
Δ
(D
1 D
2 )
P2
The effects on equilibrium price & quantity
> Decrease in Demand &
Increase in Supply
(c) Nikos Kokolis, 2012

35. Government intervention in the market system
(c) Nikos Kokolis, 2012

36. Κρατική παρέμβαση στην αγορά
P
Q
0
D S
E
P1
Q1
PA
QS
QD
P2
Μ
PA
Maximum price
“black market”
Limited quantities
maximum
price
consumers’ Protection
shortage
illegal
= P2 - PA
Government intervention in the market system
(c) Nikos Kokolis, 2012

37. P
Q
0
D S
E
Q1
P1
PΚ
QS
QD
reduced production Periods
Markets in abroad
surplus
PK
Minimum price
Excess quantity
firms’ Protection
minimum
price
Government intervention in the market system
(c) Nikos Kokolis, 2012

38. All rights reserved. No part of this presentation may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, without the prior permission in writing of Nikos
Kokolis, or as expressly permitted by law, or under terms agreed with the appropriate
reprographics rights organization. Enquiries concerning reproduction outside the scope of the
above should be sent to Nikos Kokolis, at the address above.
Presentation’s Copyright © 2012 Nikos Kokolis
Nikos Kokolis
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