Cambridge International as and a level Economics Ebook

Interaction of demand and 
supply– markets in equilibrium 
and disequilibrium
Earlier in this chapter, each side of the market was analysed 
separately. We now look at how to put them together. At 
any point in time, there will be a given set of conditions 
infl uencing demand and a given set of conditions 
infl uencing supply (see 
Table 2.8
). Using conditions refl ected 
in the demand curve 
D
0
and the supply curve 
S
0
 
previously, 
these relationships have been combined in 
Figure 2.12
.
Th
e term 
equilibrium
refers to a situation of balance 
where, at least under present circumstances, there is no 
tendency for change to occur. In this particular situation, 
equilibrium will exist when the plans of consumers (as 
represented by the market demand curve) match the plans 
of suppliers (as represented by the market supply curve).
1600
1400
1200
3000
4000
D
0
0
S
0
Price (US$)
5000
Quantity per week
Figure 2.12 
Equilibrium price and output in the market for PCs
Price of a 
standard PC 
(US$)
Quantity supplied 
per week
Quantity demanded 
per week
800
1,000
7,000
1,000
2,000
6,000
1,200
3,000
5,000
1,400
4,000
4,000
1,600
5,000
3,000
1,800
6,000
2,000
2,000
7,000
1,000
Table 2.8 
Market supply and demand schedules for PCs
Th
e market equilibrium will, therefore, be at a price of 
$1,400 with 4,000 units traded, i.e., bought and sold. Th
ese 
are referred to as