Macroeconomics 201 Lecture 3: Supply, Demand, and Equilibrium
What are the assumptions behind the market demand curve?
What are the assumptions behind the market supply curve?
Draw a market supply curve and a market demand curve for a hypothetical
widget market. Label the equilibrium price p and the equilibrium quantity q.
For a hypothetical widget market, label a price p1 that is above the equilibrium
price. Using dotted lines, indicate the quantity demand qd1 and the quantity
supplied qs1, corresponding to price p1. How would you describe this market
situation?
2
Suppose there was excess demand in the widget market. Explain thoroughly
the process by which the market would move from that disequilibrium position
to the equilibrium.
Suppose there was a market surplus in the widget market. Explain thoroughly
the process by which the market would move to the equilibrium.
Use a graph with market supply and demand functions to demonstrate the
impact of an increase in income.
Use a graph with market supply and demand functions to demonstrate the
impact of outlawing some technology used by firms in that market that
increased productivity, and for which there is no substitute.
What is own price elasticity of demand and what are the factors that
determine it?