HL IB Econ

Notes

HL IB Economics 2.3 Competitive Market Equilibrium Contents 2.3.1 Market Equilibrium & Disequilibrium 2.3.2 Functions of the Price Mechanism 2.3.3 Consumer & Producer Surplus Your notes Head to www.savemyexams.com for more awesome resources Page 1 of 22 © 2015−2024 Save My Exams, Ltd. · Revision Notes, Topic Questions, Past Papers 2.3.1 Market Equilibrium & Disequilibrium Market Equilibrium In a market system, prices for goods/services are determined by the interaction of demand and supply A market is any place that brings buyers and sellers together Markets can be physical (e.g. McDonald's) or virtual (e.g. eBay) Buyers and sellers meet to trade at an agreed price Buyers agree the price by purchasing the good/service If they do not agree on the price then they do not purchase the good/service and are exercising their consumer sovereignty Based on this interaction with buyers, sellers will gradually adjust their prices until there is an equilibrium price and quantity that works for both parties At the equilibrium price, sellers will be satised with the rate/quantity of sales At the equilibrium price, buyers are satised with the utility that the product provides Equilibrium Equilibr...