Principles of Microeconomics / Unit 2 MIC 0108 worked example, 60 to 90 seconds
Finding Equilibrium from a Schedule
The idea
A schedule lists prices with the quantity demanded and the quantity supplied at each. To find equilibrium, read down the rows for the price where the two quantities are equal; that price and that quantity are the answer. To find the surplus or shortage at any other price, subtract the smaller quantity from the larger. Above equilibrium, supply exceeds demand and the gap is a surplus; below, demand exceeds supply and the gap is a shortage.
In practice
Worked example: a schedule for bagels shows, at one dollar, four hundred demanded and one hundred supplied; at two dollars, three hundred and two hundred; at three dollars, two hundred and two hundred; at four dollars, one hundred and three hundred. The quantities match at three dollars, so the equilibrium price is three dollars and the equilibrium quantity two hundred bagels. At one dollar there is a shortage of three hundred; at four dollars a surplus of two hundred.
Where people slip
Read the gap at a single price, never across two rows. And say which it is: the gap at a low price is a shortage, the gap at a high price a surplus, and a schedule read upside down gives the wrong name to the right number.
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