In this lecture notes you will find in depth notes for the topic "Interaction of supply and demand" Theme 1 of Edexcel A level business which is called marketing and people.The textbook "Edexcel AS/A level BUSINESS, 5th edition, Pearson" is referenced in these lecture notes. They are really well wr...
- EQUILIBRIUM means a state of equality or balance
between demand & supply.(no excess
demand and
supply). No tendency for price or quantity to change
- DISEQUILIBRIUM means where supply and
demand are out of balance (/are not equal)
- The interaction of buyers and sellers will provide
EQUILIBRIUM PRICE (known also as MCP)
in a
market where demand and supply are equal.
When there is a disequilibrium two cases occur:
.Surplus (Excess supply)
- Where supply exceeds demand, then there is a surplus due to
a high price
- A business raises its price, as a result demand drop
- The goods would remain unsold
.Shortage (excess demand)
- Demand exceeds supply because of the low prices
- Shortage of goods in the market
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