Explanation Refer the figure below. The demand curve D obeys the law of demand and the supply curve S obeys the law of supply. The inverse relationship between the quantity demanded and price is shown by the downward sloping demand curve. It is the locus of the points which show the willingness of the people to buy different quantities at varying price levels. On similar line of discussion the supply curve shows the direct relationship between the quantity supplied and price. It is the locus of points which the willingness of the producers to supply different quantities at varying price levels. Equilibrium implies the point of stability or rest. It is the quantity price combination where the market forces would be in a state of rest...

Law of demand , Law of Supply and Market equilibrium Concept introduction: Law of Supply - It states that as the price of good increases its quantity supplied increases and vice versa. In other words, there is a direct relationship between the quantity supplied and price of the good. The law is based on the assumption of ceteris paribus , that is, all other factors affecting supply remain constant. Law of Demand - It states that as the price of good increases its quantity demanded decreases and vice versa. In other words, there is an inverse relationship between the quantity demanded and price of the good. The law is based on the assumption of ceteris paribus , that is, all other factors affecting supply remain constant. Market Equilibrium- The price output combination where quantity demanded equals the quantity supplied is the market equilibrium. It is based on the operation of the law of demand and the law of supply.

Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)

19th Edition

ISBN: 9780134478760

Author: Roger LeRoy Miller

Publisher: PEARSON

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Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

Chapter 3, Problem 3.5LO

To determine

Law of demand, Law of Supply and Market equilibrium

Concept introduction:

Law of Supply - It states that as the price of good increases its quantity supplied increases and vice versa. In other words, there is a direct relationship between the quantity supplied and price of the good. The law is based on the assumption of ceteris paribus, that is, all other factors affecting supply remain constant.

Law of Demand - It states that as the price of good increases its quantity demanded decreases and vice versa. In other words, there is an inverse relationship between the quantity demanded and price of the good. The law is based on the assumption of ceteris paribus, that is, all other factors affecting supply remain constant.

Market Equilibrium- The price output combination where quantity demanded equals the quantity supplied is the market equilibrium. It is based on the operation of the law of demand and the law of supply.

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