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Chapter 3: Q.17 (page 78)

How can you locate the equilibrium point on a

demand and supply graph?

Short Answer

Expert verified

The point where demand curve and supply curve intersect each other considered as equilibrium.

Step by step solution

01

Step 1.  Concept

In a market, the demand curve shows the relationship between the price and the quantity demanded. The supply curve shows the relationship between the price and the quantity supplied.

02

Step 2.Demand-Supply Curve

We can locate the equilibrium point on a demand and supply graph, where both the demand curve and supply curve intersect each other at a certain point.

Explanation-

The demand curve has a downward sloping that shows the inverse relationship between price & quantity.

The supply curve has an upward sloping that reflects a positive relationship between price and quantity.

A certain point where both curves intersect refers to as Equilibrium.

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Most popular questions from this chapter

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

Will supply curves have the same shape in all

markets? If not, how will they differ?

If a price floor benefits producers, why does a price floor reduce social surplus?

Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.

a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.

b. The winter is exceptionally cold.

c. A major discovery of new oil is made off the coast of Norway.

d. The economies of some major oil-using nations, like Japan, slow down.

e. A war in the Middle East disrupts oil-pumping schedules.

f. Landlords install additional insulation in buildings.

g. The price of solar energy falls dramatically.

h. Chemical companies invent a new, popular kind of plastic made from oil.

Review Figure 3.4. Suppose the government

decided that, since gasoline is a necessity, its price

should be legally capped at $1.30 per gallon. What do you anticipate would be the outcome in the gasoline market?
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