Macroeconomics

‭Market Disequilibrium‬ ‭Real-world‬ ‭markets‬ ‭are‬ ‭not‬ ‭always‬ ‭in‬ ‭equilibrium‬ ‭as‬ ‭market‬ ‭supply‬ ‭does‬ ‭not‬ ‭always‬ ‭equal‬ ‭market‬ ‭demand.‬ ‭These‬ ‭situations‬ ‭are‬ ‭referred‬ ‭to‬ ‭as‬ ‭market‬ ‭disequilibrium‬ ‭that‬ ‭can‬ ‭be‬ ‭described‬ ‭using‬ ‭two‬ ‭scenarios.‬ ‭Excess‬ ‭demand‬‭or‬‭shortage‬ ‭occurs‬‭when‬ ‭quantity‬‭demanded‬‭is‬‭greater‬‭than‬‭quantity‬‭supplied‬ ‭at‬‭a‬ ‭price‬‭that‬‭is‬ ‭below‬‭the‬‭equilibrium‬‭point‬ ‭.‬‭This‬‭means‬‭that‬‭suppliers‬‭cannot‬‭satisfy‬‭consumers’‬‭wants‬‭at‬ ‭this price given their current level of production.‬

‭Table 5: Market Disequilibrium - Excess Demand‬ ‭Price of a Tablet ($)‬

‭Quantity of Tablets Demanded‬

‭Quantity of Tablets Supplied‬

‭80‬

‭700‬

‭100‬

‭100‬

‭600‬

‭200‬

‭120‬

‭500‬

‭300‬

‭140‬

‭400‬

‭400‬

‭160‬

‭300‬

‭500‬

‭180‬

‭200‬

‭600‬

‭200‬

‭100‬

‭700‬

‭In‬‭this‬‭schedule,‬‭excess‬‭demand‬‭occurs‬ ‭at‬‭prices‬‭$80,‬‭$100,‬‭and‬‭$120.‬‭At‬‭$80,‬ ‭quantity‬ ‭demanded‬ ‭(referred‬ ‭to‬ ‭as‬ ‭Qd‬ ‭hereon)‬ ‭exceeds‬ ‭quantity‬ ‭supplied‬ ‭(referred‬‭to‬‭as‬‭Qs‬‭hereon)‬‭by‬‭600‬‭units‬ ‭(700‬ ‭minus‬ ‭100).‬ ‭At‬ ‭$100,‬ ‭excess‬ ‭demand‬ ‭is‬ ‭400‬ ‭units,‬ ‭and‬ ‭at‬ ‭$120‬ ‭excess demand is 200 units.‬ ‭On‬‭the‬‭demand-supply‬‭diagram,‬‭excess‬ ‭demand‬ ‭is‬ ‭represented‬ ‭below‬ ‭the‬ ‭equilibrium point as follows:‬ ‭At‬ ‭a‬ ‭price‬‭of‬‭$100,‬‭Qd‬‭=‬‭600‬‭units‬‭and‬ ‭Qs‬‭=‬‭100‬‭units‬‭→‬‭there‬‭is‬‭a‬‭shortage‬‭of‬ ‭400 units.‬

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