Changes in Equilibrium

Discussion focuses on the interplay of demand and supply in the apple market at different price levels.
Analysis utilizes a graph with:
- Vertical axis: Price per pound of apples ($1 to $5)
- Horizontal axis: Quantity of apples produced (0 to 5000 pounds in thousands)
- Time period considered: One week.

Characteristics of Demand:
- When the price is high, the quantity demanded decreases.
- Example:
  - At $5, quantity demanded is 500 pounds.
  - At $1, quantity demanded is 4000 pounds.
The demand curve slopes downward from left to right, indicating that higher prices lead to lower demand.

Characteristics of Supply:
- There is a minimum price (e.g., 50 cents) below which producers won’t supply apples.
- At $1, suppliers are willing to supply 1000 pounds.
- Supply increases as prices rise, creating an upward slope.
The graph can represent either a specific supplier or a general market focus, such as a town's apple market.

Quantity Supplied: 1000 pounds
Quantity Demanded: 4000 pounds
Outcome:
- Shortage of 3000 pounds (more demand than supply).
- Consumers eager to purchase apples will likely bid up prices, prompting suppliers to increase production.
- Producers will adjust, leading to potential price increase and enhanced supply to meet demand.

Quantity Supplied: 3000 pounds
Quantity Demanded: 1300 pounds
Outcome:
- Surplus of 1700 pounds (more supply than demand).
- Enterprise responding to surplus may lead to price reductions to encourage sales.
- As prices drop, quantity supplied will decrease while quantity demanded will increase.

Both scenarios illustrate the market adjustment towards equilibrium.
Equilibrium occurs when the quantity supplied equals the quantity demanded:
- Equilibrium Price: Approximately $2.15 per pound.
- Equilibrium Quantity: Approximately 2200 pounds.
At equilibrium, producers and consumers both benefit, with no unsold apples.
Key Principle: Market dynamics drive prices to stabilize at the equilibrium point, balancing supply and demand effectively.