Key Points
Key Points: Basic Concepts of Equilibrium and Equilibrium Price
- Equilibrium is when there is no tendency for price or quantity to change.
- Equilibrium price makes buyers and sellers agree on how much to buy and sell.
- Both marginal utility and marginal cost matter in deciding the final price.
Key Points: Equilibrium Price and Quantity in a Competitive Market
- Neither buyers nor sellers set the price alone; market interaction does.
- Equilibrium price is where demand equals supply—no shortage or surplus.
- Actual price moves towards equilibrium due to market competition.
Key Points: Effect of Simultaneous change in Demand and Supply on Equilibrium Price
- Price effect depends on the size and direction of shifts in both demand and supply.
- Quantity usually moves in the direction of both curves (↑ if both rise, ↓ if both fall).
- Use diagrams to show shifts.
- Always check which change (demand or supply) is bigger to predict the final outcome.
Key Points: Some Special Cases of Equilibrium
- If either curve is perfectly elastic, only quantity changes for market shocks; price stays the same.
- If either curve is perfectly inelastic, only price changes for market shocks; quantity stays the same.
- Diagrams help show if price or quantity is affected by changes in demand or supply.
Key Points: Applications of Tools of Demand and Supply Price Control
- Price ceiling helps buyers (causes shortage).
- Price floor helps sellers (causes surplus).
- Both disrupt market equilibrium.
- Rationing and black markets often follow government controls.
Concepts [6]
- Basic Concepts of Equilibrium and Equilibrium Price
- Equilibrium Price and Quantity in a Competitive Market
- Effect of Simultaneous change in Demand and Supply on Equilibrium Price
- Effects of Simultaneous Changes (Shifts) in Demand and Supply
- Some Special Cases of Equilibrium
- Applications of Tools of Demand and Supply Price Control
