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 Form 3 Business Studies: Demand and supply online lessons

Meaning of equilibrium price and quantity and the effects of excess demand and supply

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Answer Text:
Equilibrium price and quantity.
-Equilibrium price refers to the market price which equates the quantity demanded to quantity supplied.
-Equilibrium quantity refers to the quantity which equates the quantity demanded to the quantity supplied.
-Equilibrium point refers to the point at which demand and supply are equal
figdemand21720201139.JPG
Excess demand and excess supply.
-Excess demand refers to the amount by which the quantity demanded exceeds the quantity supplied at a given price.
-Excess supply is where the quantity supplied exceeds the quantity demanded
figdemand21720201140.JPG
Excess demand leads to:
-A shortage in the market.
-A creation of black market.
-Price is likely to increase to equilibrium price.
Excess supply leads to:
-Market will be flooded with products
-Decrease in demand for products.
-The price of the product will fall towards equilibrium.


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