Market equilibrium
Equilibrium: where supply meets demand at P = $5, Q = 5
Solving for equilibrium algebraically
Disequilibrium
Surplus (excess supply)
At P = $7: Qs (7) > Qd (3) → Surplus of 4 units
Shortage (excess demand)
At P = $3: Qd (7) > Qs (3) → Shortage of 4 units
Self-correcting mechanism
Changes in equilibrium
Demand shifts (supply constant)
Demand increase → higher price and higher quantity
Supply shifts (demand constant)
Supply increase → lower price and higher quantity
Double shifts (both curves shift)
Summary table of all single shifts
AP exam tips for 1.6
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Common mistakes
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