Equilibrium

MARKET DEMAND & SUPPLY

$54321

1020355580

$54321

60503520 5

x200

B

U

Y

E

R

S

P QD

BUSHELS

OF CORNMARKET

DEMAND

2,0004,0007,000

11,00016,000

x200

S

E

L

L

E

R

S

12,00010,000

7,0004,0001,000

P QS

BUSHELS

OF CORNMARKET

SUPPLY

EQUILIBRIUMGraphically…

7

SP

Qo

$5

4

3

2

1

2 4 6 8 10 12 14 16

P QD

$54321

2,0004,0007,000

11,00016,000

$54321

12,00010,000

7,0004,0001,000

D

P QS

Price of Corn

Quantity of Corn

CORN

MARKET

CORN

MARKET

Market Clearing Equilibrium

MARKET DEMAND & SUPPLY

7

SP

Qo

$5

4

3

2

1

2 4 6 8 10 12 14 16

P QD

$54321

2,0004,0007,000

11,00016,000

$54321

12,00010,000

7,0004,0001,000

D

P QS

Price of Corn

Quantity of Corn

CORN

MARKET

CORN

MARKETSurplusAt a $4 price

more is being

supplied than

demanded

MARKET DEMAND & SUPPLY

117

SP

Qo

$5

4

3

2

1

2 4 6 8 10 12 14 16

P QD

$54321

2,0004,0007,000

11,00016,000

$54321

12,00010,000

7,0004,0001,000

D

P QS

Price of Corn

Quantity of Corn

CORN

MARKET

CORN

MARKET

At a $2 price

more is being

demanded than

supplied

Shortage

MARKET DEMAND & SUPPLY

Debate

• Should we raise the minimum wage?