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Chapter 3: Q 16. (page 78)

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

Does a price ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?

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

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 is total surplus? How is it illustrated on a demand and supply diagram?

Explain why the following statement is false: 鈥淚n the goods market, no seller would be willing to sell for less than the equilibrium price.鈥�
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