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Market Disequilibrium and Changes in Equilibrium

Nancy Hill

Nancy Hill

9 min read

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Study Guide Overview

This study guide covers market equilibrium and disequilibrium, including shortages and surpluses. It explains how shifts in supply and demand affect equilibrium price and quantity, and explores consumer/producer surplus and deadweight loss. Finally, it addresses double-shift problems and provides practice questions.

AP Microeconomics: Market Equilibrium & Disequilibrium - The Night Before

Hey! Let's make sure you're totally set for your AP Micro exam tomorrow. We're going to break down market equilibrium, disequilibrium, and how shifts in supply and demand affect everything. Think of this as your ultimate cheat sheet, designed to make everything click. Let's get started!

Market Equilibrium and Disequilibrium

Equilibrium: The Sweet Spot

  • Definition: Market equilibrium is where the quantity demanded (Qd) equals the quantity supplied (Qs). It's the point where the supply and demand curves intersect. Think of it as the market's happy place where everyone's needs are met. 🤝
  • Visual: The intersection of the supply and demand curves.

Disequilibrium: When Things Get Messy

  • Definition: Disequilibrium occurs when Qd ≠ Qs. This happens when the price is either too high or too low, creating either a surplus or a shortage.
  • Causes: Usually caused by prices being above or below the equilibrium price.

Shortages and Surpluses

Shortages: Too Much Demand, Not Enough Supply

  • Definition: Qd > Qs. Think of it like trying to buy the last concert ticket – everyone wants it, but there aren't enough to go around. 🎫
  • Cause: Price is set below the equilibrium price.
  • Result: Consumers are willing to buy more than producers are willing to sell.

Surpluses: Too Much Supply, Not Enough Demand

  • Definition: Qs > Qd. Imagine a store with too many of the same item that nobody wants to buy. 🛍️
  • Cause: Price is set above the equilibrium price.
  • Result: Producers are willing to sell more than consumers are willing to buy.

Visualizing Shortages and Surpluses

  • Shortage: Price is below equilibrium, leading to high demand and low supply.

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  • Surplus: Price is above equilibrium, leading to low demand and high supply.

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Memory Aid

Mnemonic: "Surplus is when there is so much supply" and "Shortage is when there is so little supply" Remember, both start with 'S'!

Market Adjustment: Back to Equilibrium

  • Long-Run Trend: Markets naturally move towards equilibrium. It's like a self-correcting system. 🔄
  • Shortage Adjustment: Price increases as consumers compete for limited goods. Think of it like an ...

Question 1 of 12

🎉 What is the hallmark of market equilibrium?

Quantity demanded exceeds quantity supplied

Quantity supplied is greater than quantity demanded

Quantity demanded equals quantity supplied

Prices are fluctuating rapidly