Principles of Macroeconomics / Unit 2 MAC 0108 worked example, 60 to 90 seconds
Finding Equilibrium from a Schedule
The idea
Given a table of prices with quantity demanded and quantity supplied beside each, work down the rows. At each price, subtract quantity supplied from quantity demanded. Where the difference is positive there is a shortage of that size; where it is negative there is a surplus of that size; where it is zero you have found the equilibrium price, and the common quantity is the equilibrium quantity. The shortages appear at the low prices and the surpluses at the high ones, and the gap shrinks as you approach equilibrium from either direction.
In practice
Worked example: at four dollars buyers want ninety units and sellers offer thirty, a shortage of sixty. At six dollars buyers want seventy and sellers offer fifty, a shortage of twenty. At seven dollars both are sixty, so seven dollars is the equilibrium price and sixty the equilibrium quantity. At nine dollars buyers want forty and sellers offer eighty, a surplus of forty.
Where people slip
Read the question carefully for which quantity is asked. The size of a shortage is the gap between the two quantities at that price, not the distance from the equilibrium quantity, and the two are different numbers.
Your place on the trail
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