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Demand and Supply in Product Markets

The determination of equilibrium price: Equilibrium price and output, and disequilibrium

  • 3 things to know
  • AS Units 1 and 2

Overview

Recall questions on Equilibrium price and output, and disequilibrium, Movements along and shifts of the demand and supply curves.

What you need to know

Answer each one before you reveal it.

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Key term

Define equilibrium output in a competitive market.

Key term

What information can be determined from the intersection point of demand and supply curves on a standard market diagram?

Key term

What causes a movement along a demand curve?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is the equilibrium price in a market?

    Model answer

    The equilibrium price is the price at which the quantity demanded by consumers equals the quantity supplied by producers, so there is no tendency for price to change.

  2. 2

    How can you identify whether a market is in disequilibrium using a demand and supply diagram?

    Model answer

    By comparing the quantity demanded and quantity supplied at a given price; if they are not equal (the price is above or below the intersection), the market is in disequilibrium with either excess supply or excess demand.

  3. 3

    Define equilibrium output in a competitive market.

    Model answer

    Equilibrium output is the quantity bought and sold at the equilibrium price where demand and supply intersect.

  4. 4

    Where does equilibrium occur on a supply and demand diagram?

    Model answer

    Equilibrium occurs at the intersection of the demand curve and the supply curve, with equilibrium price shown on the vertical axis and equilibrium quantity on the horizontal axis.

  5. 5

    What information can be determined from the intersection point of demand and supply curves on a standard market diagram?

    Model answer

    The intersection point shows both the equilibrium price (read from the vertical axis) and the equilibrium quantity (read from the horizontal axis).

  6. 6

    What causes a movement along a demand curve?

    Model answer

    A movement along a demand curve occurs when the price of the good itself changes, causing a change in quantity demanded.

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AThe demand curve shifts to the left.
BExcess supply exists at the original price.
CPrice falls until a new equilibrium is reached.

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Actual growth means a realised increase in output.
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