Authors libby rittenberg 173
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The equilibrium price occurs where the demand and supply curves
intersect. At this price, the quantity demanded equals the quantity
supplied. A price higher than the equilibrium price increases the quantity
supplied and reduces the quantity demanded, causing a surplus. A price
lower than the equilibrium price increases the quantity demanded and
reduces the quantity supplied, causing a shortage. Usually, market
surpluses and shortages are short-lived. Changes in demand or supply,
caused by changes in the determinants of demand and supply otherwise
held constant in the analysis, change the equilibrium price and output. The
circular flow model allows us to see how demand and supply in various
markets are related to one another.
CONCEPT PROBLEMS
1. What do you think happens to the demand for pizzas during the Super
Bowl? Why?
2. Which of the following goods are likely to be classified as normal
goods or services? Inferior? Defend your answer.
1. Beans
2. Tuxedos
3. Used cars
4. Used clothing
5. Computers
6. Books reviewed in The New York Times
7. Macaroni and cheese
8. Calculators
9. Cigarettes
10. Caviar
11. Legal services
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
173
