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 19: What To Do 6 Months Before Applying For A Mortgage The Crazy House Prices Podcast

This episode is a must-listen for anyone embarking on the journey of buying a home, especially focusing on the crucial six-month preparation period before applying for a mortgage. In This Episode: – Getting Organised: Understand why the six months leading up to your mortgage application are vital and how to best prepare during this period. – Credit Reports Decoded: Learn the importance of checking your credit report early and how to address any unexpected issues that might arise. – Financial Habits for Success: Discover practical tips for maintaining clean bank statements and why certain spending habits can be red flags to lenders. – Savings Strategies: Gain insights into effective savings techniques, setting up different accounts for various needs, and how to plan for additional costs beyond your deposit. – Mortgage Exemptions Explained: Get a clear understanding of the recent changes in mortgage lending rules in Ireland, including exemptions and how they might apply to you. Episode Highlights: – The significance of being financially organised before applying for a mortgage. – The impact of your credit history and how to preemptively tackle potential issues. – Tips on managing your finances, from avoiding gambling transactions to handling overdrafts. – Strategies for saving effectively, including how to allocate funds for immediate needs and long-term goals. – Understanding the nuances of mortgage lending rules and how to potentially qualify for exemptions. 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 19: What To Do 6 Months Before Applying For A Mortgage
  2. Ep 18: How To Invest Your Children’s Allowance
  3. Ep 17: How to Manage your Money: Investing and Pensions with Niall O’ Connor
  4. Ep 16: Solutions to Ireland’s Housing Crisis with Dara Turnbull
  5. Ep 15: Outbid but Not Outdone: how Niamh O’Sullivan bought her home using the letter trick

Test your knowledge of Market Equilibrium