Market Equilibrium

  • Define market, price quantity equilibrium 
  • Draw and explain market equilibrium graph
  • Calculate and draw supply, demand and equilibrium 
  • Explain consumer and producer surplus 
  • Explain and draw excess demand and excess supply
  • Draw and explain maximum and minimum price

Market Equilibrium (demand and supply)

Market equilibrium is the point where the quantity of a product demanded is equal to the quantity of a product supplied. This creates the market clearing price and quantity where there is no excess demand or excess supply.

Equilibrium price is the market-clearing price. It is set where D = S.

Equilibrium quantity: The level of output where quantity demanded equals the quantity supplied.

Watch additional videos here for even better understanding.

Activity: Using Your Whiteboard

Illustrate the effects which each of the following is most likely to have on the equilibrium position for Irish Crisps: 

  1. The lack of rainfall in 2018 creates a drought which reduces potato crops.    
  2. Vegan consumers stage protests against animal‐derived flavouring on crisps.     
  3. Crisp companies receive a subsidy from the government.  
  4. 50% reduction in the price of drinks sols with crisps
  5. Quota placed on the quantity of crisps entering Ireland
  6. Government introduce a 15% levy (tax) on all income earned

Consumer and Producer Surplus

Consumer Surplus: is the difference between what a consumer actually pays for a good and the maximum s/he was willing to pay for the good rather than do without it. The utility gained from a good or service in excess of the amount paid for it. 
Producer Surplus: is the difference between what a producer receives for a good and the minimum s/he was willing to accept for the good. The extra earnings obtained by the producer above the minimum required for them to supply the good or service. 

Watch video here.

Excess Supply and Excess Demand

Activity: Using Your Whiteboard

  • Draw a demand and supply diagram, illustrate how a shortage of tickets for a major concert may arise. The concert venue has a maximum capacity of 30,000 people.
  • Using a supply and demand diagram, illustrate how a market would return to equilibrium following a surplus (excess surplus) in the market

Government Intervention: Impact on Market Equilibrium

Assessment Advice: Research Project

It is a good idea to start learning the skills needed to complete your Research Project. You do not have all the knowledge and conceptual understanding yet but you can learn to research and make links to other parts of the Leaving Cert course. It is important to use a reputable source when collecting data, therefore we will use the CSO ( Central Statistics Office).

Using your knowledge of Economics so far, research the following factors (using the CSO) and explain how they might impact the market equilibrium for rental accommodation:

Identify which determinants of demand and supply are impacted and support with labelled diagrams.

Extension: Using the infographic create a research question that you might like to investigate.

Source: CSO, 2022

Extension Activities: Podcasts

Ep 21: Sale-Agreed! What Next? The Crazy House Prices Podcast

In this episode of The Crazy House Prices Podcast, I break down what happens after a sale is agreed upon in Ireland, drawing from my book "How to Buy a Home in Ireland." I cover the crucial steps following a 'sale-agreed' status, such as notifying your solicitor, paying a booking deposit, arranging a pre-purchase survey, and securing mortgage protection and home insurance. I highlight that 'sale-agreed' is non-binding, meaning the deal isn't final until contracts are signed, and discuss common hurdles like probate, structural surveys, and potential renegotiations of the sale price. I share a checklist for buyers, including the importance of clear communication with solicitors and estate agents, and preparing for potential delays. The episode also touches on the often frustrating, slow pace of the buying process due to factors like bank delays and the complexity of probate. This episode aims to demystify the post-sale-agreed phase, offering guidance to navigate the path to homeownership with more confidence and less stress.   Support the Podcast: If you find value in my podcast and Instagram, consider supporting me on Patreon at patreon.com/crazyhouseprices. Your support helps me continue delivering valuable content and grants you access to exclusive bonus material, including Q&As where I answer every question sent in, and the opportunity to engage with my community of over 100,000 followers. Stay Connected: Don’t forget to follow me on Instagram [@CrazyHousePrices] for daily updates and tips on navigating the ever-changing landscape of the housing market in Ireland. Subscribe and Share: Enjoyed this episode? Please subscribe, share with friends and family, and leave me a review. Your feedback helps the podcast grow and reach more people on their journey to homeownership. You can order my book: "How to buy a home in Ireland" here Sponsors: Beat The Bank & Daft.ie
  1. Ep 21: Sale-Agreed! What Next?
  2. Ep 20: Extra Costs When Buying Your Home
  3. Ep 19: What To Do 6 Months Before Applying For A Mortgage
  4. Ep 18: How To Invest Your Children’s Allowance
  5. Ep 17: How to Manage your Money: Investing and Pensions with Niall O’ Connor

Test your knowledge of Market Equilibrium