DEMAND

–SUPPLY MARKET
EQUILIBRIUM
 MEMBERS
01 NGUYEN QUYNH ANH 02 DANG KHANH VI
Designing the slides Designing the slides

03 NGUYEN NGOC MAI 04 PHAM PHUONG NGA

Presenting Ex1 Presenting Ex1

05 NGUYEN NGOC HUYEN

Presenting Ex2
 01
EXERCISE 1
 Demand and supply of fridge are shown in the table
below:
Price
100 120 140 160 180 200
($/unit)
Quantity
Demanded 1000 900 800 700 600 500
(units)
Quantity
supplied 300 400 500 600 700 800
(units)
 1. What are the demand and supply equations,
equilibrium price and equilibrium quantity for fridge ?
 Demand
equations:
P=a-bQd
ΔP
When Qd =0
🡪 P=a=300
b=ΔP/ΔQ=20/100=0.2
Equation:
P=300 - 0.2 x Qd
ΔQ
🡪 Qd= (300-P) / 0.2
 Supply
equation:
P= c + dQs ΔP

When Qs = 0
🡪P = c = 40
b=ΔP/ΔQ=20/100=0.2
Equation:
P= 40+0,2 x Qs ΔQ
🡪 Qs= (P-40) / 0.2
Equilibrium price and equilibrium quantity:
✔ Equilibrium occurs when:
Qd=Qs
🡪 (300-P)/0.2=(P-40) / 0.2
🡪1500-5P=5P-200
🡪1700=10P 🡪 Pe= 170 ($/unit)
Qe =(300-Pe)/0.2=(Pe-40)/ 0.2
= (300- 170)/0.2=(170-40)/ 0.2
=650 (units)

8
2.What are the surplus and shortage of fridge at the
price of $ 200 and $ 110
 At price of 200$,
SURPLUS Quantity supplied is 800
units and Quantity
demanded is 500 units
🡪 the surplus of fridge =
800-500=300 (units)
 At price of 110$,
Quantity supplied is 350
units and Quantity
demanded is 950 units
🡪 the shortage of fridge
= 950-350=600 (units)

SHORTAGE
 3. Suppose the supply of fridge is constant, what
happened for demand for fridge if price of electricity
increase? Given that quantity demanded for fridge
change 300 units at each price level, what are new
equilibrium price and new equilibrium quantity for
fridge?
❑ The supply of fridge is constant, if price
of electricity increases, the demand for
fridge will decrease.
Because electricity is necessary for the
operation of fridges.
Demand for buying fridges will be lower.
The demanded quantity will be
remained, the supplied quantity will be
decreased
❑ If the quantity demanded increases by 300 units at
each price level, the new demand equation becomes:

Price
100 120 140 160 180 200
($/unit)
Quantity
Demanded 700 600 500 400 300 200
(units)
Quantity
supplied 300 400 500 600 700 800
(units)
+) Supply equation:
Qs = (P - 40) / 0,2
+) Demand equation:
P= a-bQd
When Qd=0🡪 a= 240
b=∆P/∆Qd= 20/100 = 0,2
P = 240-0,2Qd
Qd = (240- P) / 0,2
EQUILIBRIUM
Qd=Qs
🡪 (240- P) / 0,2
= (P - 40) / 0,2
🡪Pe = 140 ($/unit)
🡪Qe= 500 units
 4. Suppose government imposes a tax of $ 10 per one
units of fridge sold, what are new equilibrium price and
new equilibrium quantity for fridge?
Price
110 130 150 170 190 210
($/unit)
Quantity
Demanded 700 600 500 400 300 200
(units)
Quantity
supplied 300 400 500 600 700 800
(units)
❑ The tax is a non-price factor, which
affects the quantity supplied.

The quantity demanded is remained and

the quantity supplied is decreased
+) Demand equation:
Qd = (300 - P) / 0,2
+) Supply equation:
P= c + dQs
When Qs=0 => c= 50
d=∆P/∆Qs= 20/100 = 0,2
🡪P = 50+0,2Qs
or Qs = (P - 50) / 0,2
EQUILIBRIUM

Qd=Qs
🡪(300- P) / 0,2 = (P - 50) / 0,2
🡪Pe= 175 ($/unit)
🡪Qe= (300- Pe) / 0,2
= (Pe - 50) / 0,2=625 units
 5. Suppose government supports for the sellers the
amount of $ 10 per one units of fridge sold, what are
new equilibrium price and new equilibrium quantity for
Price
110 130
fridge?
150 170 190 210
($/unit)
Quantity
Demanded 700 600 500 400 300 200
(units)
Quantity
supplied 300 400 500 600 700 800
(units)
❑ The subsidy is a non-price factor,
which affects the quantity supplied.
The quantity demanded is remained
The quantity supplied is increased
+) Demand equation:
Qd = (300 - P) / 0,2
+) Supply equation:
P= c + dQs
When Qs=0 => c= 30
d=∆P/∆Qs= 20/100 = 0,2
🡪P = 30+0,2Qs
or Qs = (P - 30) / 0,2
EQUILIBRIUM

Qd=Qs
🡪(300- P) / 0,2 = (P - 30) / 0,2
🡪Pe= 165 ($/unit)
🡪Qe=(300- P) / 0,2
= (P - 30) / 0,2=675 units
 EXERCISE 02
With the aid of diagrams, show how each of
the following events affects the supply
and/or demand curve for motorcycles. In each
case, show and state the effect on the
equilibrium price and quantity.
 1
An increase in Vietnamese personal income tax
rates
 Result:
➢ can decrease the demand
of buying motorcycles
➢ less money
➢ will buy more necessary
things
 An increase in the price of steel

- The demand curve

will shift to the left.
- The equilibrium price
will decrease, and the
equilibrium quantity
will increase.
 2

An increase in the price of steel

can decrease the make producers

supply of reduce the amount
motorcycles of motorcycles to
save their profit.
- The supply curve will
shift to the left.
- The equilibrium price
will increase, and the
equilibrium quantity
will decrease.
 3

An improvement in
technology in motor
vehicle production
at the same time as a
recession hits the
Vietnamese
economy
 Result:
An improvement in
A recession hits the
technology in motor vehicle
Vietnamese economy
production
Assist producing Limit unnecessary
operation become more payments and moderate
effective their budget

Increase the supply Decrease the demand

of motorcycles of buying motorcycles
 The demand
curve will shift
to the left

The supply
curve will
shift to the
right
 ➢ The equilibrium price will drop, but the change of
equilibrium quantity can be concluded in 3 cases:

Qd and Qs
change at the
Case 1 same rate: Qe
remains

Qs increases at a Qd decreases at
faster rate Case 2 Case 3 a faster rate
compared to the compared to the
dropping rate of raising rate of Qs:
Qd: Qe increases. Qe decreases.
 Thank you
for
listening!
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