Cambridge International as and a level Economics Ebook

Equilibrium and eff iciency, the margin and change: 
It should now be clear that markets operate in a 
dynamic way, moving from equilibrium to disequilibrium 
and back again to equilibrium; the market moves from 
an eff icient position to being ineff icient and then adjusts 
naturally to again being eff icient. The causes are many. 
The time taken for these changes to come about is 
highly variable. The various elasticity measures provide 
some answers as to why this is so and how consumers 
react to change.
KEY CONCEPT LINK
SELF-ASSESSMENT TASK 
2.14
In 
Figure 2.13
, symbols are used instead of numbers.
1 
What is the market equilibrium price and quantity?
2
What area will show the total expenditure by 
consumers? Th
is will be the same as the total 
revenue earned by companies.
3 
What is the state of the market if the price is at 
P
1
?
4
What is the state of the market if the price is at 
P
0
?
5
Explain what will happen if the market is in a 
disequilibrium of:
■ 
excess demand
■ 
excess supply.
6
What advantages/disadvantages are there in using 
symbols, such as 
P
s and 
Q
s, to analyse markets 
rather than actual numbers?
P
1
P
0
P
D
0
S
E
Price
Quantity per period of time
Q
0
Q
Q
1
Figure 2.13
Consumers can easily compare prices in superstores
56
Cambridge International AS Level Economics

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Shift s in the market demand 
curve
Up to now, in looking at the demand curve, we have 
assumed that price is the only factor that aff ects the 
quantity demanded by consumers. While this analysis 
is very useful, it is clearly limited because the price of a 
PC, for example, is not the only factor infl uencing the 
demand for it – other factors play a part and are not always 
constant. Changes in these other factors are shown by 
shift s
 
in the demand curve
.
A rightward shift indicates an 
increase in demand; a left ward shift indicates a decrease 
in demand. Notice how the language changes here when 
we are talking about a 
shift 
in the whole curve rather than 
simply a 
movement 
along it – a