TOPIC 4: Equilibrium Price and Quantity & Elasticity of Demand and Supply

Output or Product/Goods Markets

Equilibrium Price and Quantity

In markets where goods and services are being sold, also known as __________, firms are the producers of outputs, while households buy them

Input or Factor Markets

Equilibrium Price and Quantity

In markets where the factors of production (like labor or capital) are sold, also called __________, households sell resources to firms

1) Buyer
2) Seller

Equilibrium Price and Quantity

We shall assume that in these two markets (Input/Factor and Output/Product/Goods Markets, neither the 1)__________ nor the 2)__________ can influence the market price.

Market Equilibrium

Equilibrium Price and Quantity

By inspection, we can see that the quantity supplied by Maria is equal to the quantity demanded by Luigi when the price is at Php 50.00. This means that both of them agree to buy and sell 14 pieces of cupcakes at a price of Php 50.00. This implies that this price-quantity combination is the most likely market outcome in this case.

We call this situation the _________.

Market Equilibrium

Equilibrium Price and Quantity

_________ is achieved when both buyers and sellers in the market agree to buy and sell a resource at a particular price.

Equal

Equilibrium Price and Quantity - Market Equilibrium

At the equilibrium price, the amount that buyers want to buy is _________ to the amount that sellers want to sell.

No reason for prices to change as long as other things remain unchanged

Equilibrium Price and Quantity - Market Equilibrium

We call this situation an equilibrium because when the forces of demand and supply are in balance, there is _________.

1) Buy and sell a quantity of a resource
2) Particular price

Equilibrium Price and Quantity - Summary

In summary, market equilibrium is the condition when both buyers and sellers in the market agree to 1]_________ (known as the Equilibrium Quantity or Q^*) at a 2]_________ (known as the Equilibrium Price or P^*).

Balanced

Equilibrium Price and Quantity - Summary

When the forces of demand and supply are _________, there is no reason for prices to change as long as other things remain unchanged.

Intersection of the Supply and Demand Curves

Equilibrium Price and Quantity - Summary

Graphically, the market equilibrium is represented by the _________.

Elasticity

Elasticity of Demand and Supply

What is the measure of the responsiveness of one variable to changes in another?

Price Elasticity

Elasticity of Demand and Supply

What type of Elasticity does the variable E_p refer to?

Income Elasticity

Elasticity of Demand and Supply

What type of Elasticity does the variable E_y refer to?

Cross Elasticity

Elasticity of Demand and Supply

What type of Elasticity does the variable E_xy refer to?

Price

Elasticity of Demand and Supply

Price elasticity of demand is the responsiveness of a product’s _________ to changes in quantity demanded.

Inversely Related

Elasticity of Demand and Supply

The value of elasticity is negative because the price and quantity demanded are _________.

Absolute Terms

Elasticity of Demand and Supply

Elasticity is talked about in __________.