文档介绍：Chapter Sixteen
Equilibrium
Market Equilibrium
A market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers.
Market Equilibrium
p
D(p), S(p)
q=D(p)
Market demand
Market supply
q=S(p)
p*
q*
D(p*) = S(p*); the market is in equilibrium.
An Example
At the equilibrium price p*, D(p*) = S(p*). That is,
which gives
and
Market Equilibrium
Can we calculate the market equilibrium using the inverse market demand and supply curves?
Yes, it is the same calculation.
Market Equilibrium
the equation of the inverse market demand curve. And
the equation of the inverse market supply curve.
Market Equilibrium
Two special cases:
quantity supplied is fixed, independent of the market price, and
quantity supplied is extremely sensitive to the market price.
Market Equilibrium
S(p) = c+dp, so d=0
and S(p) º c.
p
q
q* = c
D-1(q) = (a-q)/b
Market demand
Market quantity supplied is fixed, independent of price.
Market Equilibrium
Market quantity supplied is extremely sensitive to price.
S-1(q) = p*.
p
q
p*
D-1(q) = (a-q)/b
Market demand
Quantity Taxes
A quantity tax levied at a rate of $t is a tax of $t paid on each unit traded.
If the tax is levied on sellers then it is an excise tax.
If the tax is levied on buyers then it is a sales tax.