Demand, Supply And Equilibrium Analysis part 2 (course ECO101/ECO401)
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Course
ECO101, ECO401 (ECO401)
Institution
Virtual University Of Pakistan
The chapter on Demand, Supply, and Equilibrium Analysis delves into the fundamental principles that govern market dynamics. It explores the intricate interplay between consumer demand and producer supply, dissecting the forces that shape economic transactions.
The notes cover some basic definition...
Equilibrium Can Shift If:
• Demand Curve Shifts.
• Supply Curve Shifts.
• Both Shift.
This gives rise to eight possibilities. These eight possibilities can be summarized as following:
Points to note in these 8 possibilities:
1.Demand curve shifts: Whenever the demand curve shifts, the new equilibrium is achieved
by moving along the supply curve.
2.Supply curve shifts: Conversely, when the supply curve shifts, the new equilibrium is
attained by moving along the demand curve.
3.Simultaneous shifts: In cases where both the demand and supply curves shift, the
adjustment process involves moving first along the demand curve and then along the supply
curve.
Government's Role in Price-Determination & Equilibrium Analysis
Identification Problem:
- The identification problem arises when determining the shape and location of the demand
and supply curves is not fully known.
- It is challenging to ascertain whether a specific change in price and quantity is due to a shift
in the demand curve, the supply curve, or both.
Government Intervention:
- The government influences equilibrium through two primary interventions.
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