What is the relationship between quantity

demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?

Short Answer

Expert verified

In equilibrium, both demand and supply for a good are equal.

If there is a scarcity of a good, quantity demanded exceeds the quantity supplied.

If there is a surplus, quantity supplied exceeds the quantity demanded.

Step by step solution

01

Step 1. Define demand and supply.

Demand is an economic theory that refers to a consumer's desire to buy products and services as well as their readiness to pay a price for them.

The total amount of a certain commodity or service available to customers is described by supply, which is a fundamental economic notion.

02

Step 2. Relationship between quantity demanded and quantity supplied at equilibrium, when there is a shortage and when there is a surplus.

The total number of units acquired at a certain price is referred to as the quantity demanded. The entire number of units sold at a given price is referred to as quantity supplied. The quantity required and quantity supplied are equal in balance. In other words, in equilibrium, both demand and supply for a good are equal.

If there is a scarcity of a good, it signifies that the quantity demanded exceeds the quantity supplied, resulting in an excess demand.

If there is a surplus, it signifies that the quantity supplied exceeds the quantity demanded, resulting in an oversupply.

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Most popular questions from this chapter

Let's think about the market for air travel. From August 2014 to January 2015, the price of jet fuel increased roughly 47%. Using the four-step analysis, how do you think this fuel price increase affected the equilibrium price and quantity of air travel?

Consider the demand for hamburgers. If the price of a substitute good (for example, hot dogs) increases and the price of a complement good (for example, hamburger buns) increases, can you tell for sure what will happen to the demand for hamburgers? Why or why not? Illustrate your answer with a graph.

What does a downward-sloping demand curve mean about how buyers in a market will react to a higher

price?

Review Figure 3.4 again. Suppose the price of gasoline is \(1.00. Will the quantity demanded to be lower or higher than at the equilibrium price of \)1.40 per gallon? Will the quantity supplied be lower or higher? Is there a shortage or a surplus in the market? If so, of how much?

Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.

a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.

b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.

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