MICROECONOMICS

WEEK 4 / SESSION 4
MICROECONOMICS
Learning Unit 1
Specific learning achievement:
Unit 1

At the end of the unit, the students

they will understand the generalities of the
economía, de la demanda y el
market equilibrium.
What is supply and why is it important?
THE OFFER

The amount of a good or service that producers

they are willing to sell for a given period to a
specific price.
IMPORTANCE OF THE OFFER

The supply is important because it is the amount that the

producers plan to sell over a period
determined, at a particular price.
 OFFER AND DEMAND IN THE
BALANCE; EXAMPLES,
EXERCISES. DISPLACEMENT
FROM THE DEMAND IN THE
BALANCE. DISPLACEMENT OF
THE OFFER AT EQUILIBRIUM
Week 4 / Session 4
Achievement of the session

At the end of the session, the student

analyze the market equilibrium, to
through the supply and demand graphs
demand, using for this a
example case
THEMATIC CONTENT
Supply and Demand at Equilibrium
Examples and Exercises
Shift of demand in equilibrium
Shift of supply in equilibrium
 VIDEO
Let's watch the following video

[Link]

What is market equilibrium?

WE OBSERVE AND RESPOND

• Why is the price of the tickets?

interprovincial travel increases on holidays
long week and they return to normality
after that period?

• Why are some prices like those of cell phones

they decrease as time goes by,
while others, like the price of houses and
land rises considerably?
THE MARKET
THE MARKET
THE MARKET
THE MARKET
 THE MARKET

The market
It does not have

what being a
place
physical....
 MARKET EQUILIBRIUM
Equilibrium is a situation in which opposing forces counteract each other.
In the markets, equilibrium occurs when the price manages to make
buyers' and sellers' plans agree.
The equilibrium price is the price at which the quantity demanded is equal to
the amount offered.
The equilibrium quantity is the amount bought and sold at the price of
balance.
. El precio regula los planes de compra y venta.
. The price adjusts when the buying and selling plans do not match.
correspond.
Market Equilibrium

Price as a regulator
The figure illustrates the price and the
equilibrium quantity in the
CD-R market.
If the price of a disc is $2,
the offered quantity of disks
exceeds the quantity
demanded for what there is a
excess of disks.
 MARKET EQUILIBRIUM

If the price of a disk is $1,

the quantity demanded
exceeds the offered amount and
there is a shortage of disks

If the price of a disc is

$1.50, the quantity demanded
equals the amount offered
so they would not have
neither excesses nor shortages.
 MARKET EQUILIBRIUM
Price adjustments
At prices above the
balance, an exceeding impulse
the price to drop.
At prices below
balance, missing drives to
price to rise.
At the equilibrium price, the plans
of buying and selling agree and
the price does not vary.
Market Equilibrium

Due to the price

climb when it is about to
under the balance, down
when it is above
of balance and remains
constant when it is in
the equilibrium, the price
tends to balance and
stay there until
some event changes the
balance.
MARKET EQUILIBRIUM
They are all the bidders (supply curve) and all the
demanders (demand curve) those who
They determine the market price and quantity.

They are equilibrium prices and quantities, since

they are always tended to.

If the price is ABOVE the equilibrium, at P1

there will be an EXCESS OF SUPPLY (abundance), people
he is not going to want to buy much of the good, therefore, the
producers will have to lower the price to the price
to balance it so that they buy it.

If the price is BELOW equilibrium, at P2

there will be an EXCESS OF DEMAND (scarcity), people
will fight to buy the few goods that exist and
this motivates charging more, even at the price of
balance.
 PRICE CHANGE PREDICTION
AND QUANTITIES
Change in demand
The figure shows the effect of
a change in demand
An increase in demand
shift the demand curve
to the right and create a
lacking in relation to the
quantity demanded at the price
of initial equilibrium.
Prices are rising and the
offered quantity increases.
 PREDICTION OF PRICE CHANGES
AND QUANTITIES
Change in the offer
The figure shows the effect of
a change in the offer.
An increase in supply
shifts the supply curve
to the right and create a
surplus with respect to the
quantity offered at the price of
initial equilibrium.
Prices fall and the quantity
demand increases.
 PREDICTION OF PRICE CHANGES
AND QUANTITIES
Changes in demand and the
offer
A change in demand and the
offer changes the price and the
equilibrium quantity, but it is
it is necessary to know the
relative magnitudes of these
changes to predict some
of its consequences.
PREDICTION OF PRICE CHANGES
AND AMOUNTS

The figure shows the effects

of a change in demand and
the offer in the same direction.
An increase in both the
demand as in supply
increase the amount of
balance but has an effect
uncertain about the price of
equilibrium.
EXERCISE
In the city of Lomitas, the market demand for canned tuna
is given by the following function:
Qd = 260 - 0.2 P
Where Qd is the quantity demanded (thousands of cans of tuna per month)
P is the price of each can (S/).

The market supply of tuna is given by:

Qo = 5 + 5 P
Where Qo is the quantity supplied (thousands of cans of tuna monthly) and P
It is the price of each can (S/).
 EXERCISE
a) Find the quantity traded in the market and the equilibrium price. Graph.
b) Find the quantity and equilibrium price of the demographic effect if the new demand is
Qd = 300-0.2P

c) Tuna is a seasonal product; there are times when its catch is regulated to avoid its
disappearance and allow it to reproduce. What effects do you think the ban could have?
tuna in the market? Explain and graph.

d) Halle la cantidad y precio de equilibrio del efecto de la veda si la nueva oferta es Qo = 0.5
+ 5P.

e) Mention what factors could lead to an increase in supply in this market. Explain.
graph its effects.

f) Mention what things could cause demand to decrease in this market. Explain.
and graph its effects.
EXERCISE
g) What would happen to the price and equilibrium quantity if it is given to the
the same time an increase in supply and an increase in
demand?

h) What would happen to the price and equilibrium quantity if it occurs to

simultaneously an increase in supply and a decrease in
demand?
What would happen to the price and equilibrium quantity if it is given to the same
Is there a fall in supply and a fall in demand?

j) What would happen to the equilibrium price and quantity if it is given to the
same time a drop in supply and an increase in demand?
EXERCISE–ANSWER a)
In equilibrium, the Market Demand
it must be equal to the Market Offer:
Qd = Qo
260–0.2 P = 5 + 5P
After so much:
P = 49.04 is the equilibrium price in
soles per can
We replace this price with any
from the equations (Supply or Demand) and
we have:
Q = 250.19 is the equilibrium quantity in
thousands of cans.
We can do the same with the supply. Find out what the price would have to be so that it is not offered.
nothing. We set Q = 0 and substitute in the Offer:

0 = 5 + 5P
P = - 1 (the price would have to be negative)
Graphically, it is where the supply intersects the price axis.
EXERCISE–ANSWER b)
Qd = 300–0.2 P

Qo = 5 + 5P

Qd = Qo

300-0.2P = 5 + 5P

P = 56.73 soles the can is the price of

balance

Q = 288.65 miles of cans are traded in the

balance
EXERCISE–RESPONSE c)

The fishing ban on

tuna would make the curve of
the offer is moving towards the
left.

The result is a minor.

tuna consumption and to a
highest price (there is
relative scarcity.
EXERCISE–RESPONSE d)
Qd = 260–0.2 P

Qo = 0.5 + 5P

Qd = Qo

260 - 0.2P = 0.5 + 5P

P = 49.9 soles per can is the equilibrium price

Q = 250.02 miles of tin are traded in the

balance

The ban caused a higher and lower price.

consumption of tuna cans (although the effect is
very small).
EXERCISE–RESPONSE e)
An increase in supply could occur, due to
example yes:

There is a technological improvement that

makes it easier to fish.
If the price of the can decreases.
If wages decrease.
If there is an increase in the number of
fishermen.
If there is a ban on another fish and it increases
tuna fishing.

The result is a higher consumption of tuna

there is a lower price (relative abundance).
EXERCISE–ANSWER f)
A drop in demand could occur, due to
example if:

People go on vacation abroad.

Little Valleys.
It became fashionable to eat ceviche of
sole
The price of chicken has gone down.
There are indications that companies are not
complying with food safety.
There is a recession in Lomitas, and therefore, its
inhabitants have decreased their level of
average incomes.

The result is a lower consumption of tuna and a

a lower price (relative abundance).
EXERCISE–ANSWER g)
If both supply and demand increase at the same time
demand:
The demand curve shifts to the
right.
The Supply curve shifts to the
right

Result
We can be sure that there will be a
increase in the amount traded in the
market.
We don't know if the price will be maintained.
Will it go up or down? It depends on the magnitudes.
of both movements. If the one of the
Here the price goes up if demand is greater, the price will rise; if
Supply predominates, the price will drop.
 EXERCISE–ANSWER h)
If there is an increase in supply simultaneously with
a decrease in demand
The Supply curve shifts to the
right
The Demand curve shifts to the
left

Result
We can be sure that there will be a
fall in price.
We don't know what will happen with the quantity.
It depends on the magnitudes of both.
movements. If the demand one is more
strong, the amount will decrease; if it predominates the
offer, it will increase the amount.
Here the price goes down
EXERCISE–ANSWER i)
If there is a simultaneous decrease in supply
and the demand:
The Supply curve shifts towards
the left
The demand curve shifts
to the left

Result
We can be sure that there will be
a decrease in the traded amount.
We don't know what will happen with it.
price. It depends on the magnitudes
of both movements. If the of the
demand is stronger, it will drop the
price; if supply predominates,
the price will increase.
EXERCISE–ANSWER j)
If there is a drop in supply in the form
simultaneously with an increase in demand:
The supply curve shifts to the
left
The Demand curve shifts to the
right.

Result
We can be sure that there will be a
increase in price.
We do not know what will happen with the quantity.
It depends on the magnitudes of both.
movements. If that of the demand is more
strong, will increase the amount; if it predominates
the offer will decrease the quantity.
 Class activity
As a group, prepare a report on the following:
1. Practical case:
Determine the quantity and equilibrium price for the market of
antibiotics, knowing that:
Qd = 750-40Px
Qs = -300 + 60pX

a) Create the demand and supply table

b) Graph both equations on the same line

According to that equation, interpret what would happen to the sick.

due to a severe infection Duración: 30 min
c) If the price is set at S/. 9.00
d) If the price is regulated at S/. 12.00
END OF SESSION 4
Conclusions of learning

MARKET

Market Equilibrium

SHIFT IN THE DEMAND AT EQUILIBRIUM

SHIFT OF THE SUPPLY IN EQUILIBRIUM

EXERCISES
 VIRTUAL ACTIVITY: FORUM

Tipo de actividad:Foro
Duration: Next session
Instructions: Answer the following questions and comment at least on the
intervention of two of your colleagues.
1. Suppose that oil begins to run out and the extraction process
it becomes more expensive. Examine the effects within the oil market and
from other fuels.
2. The government must intervene by raising the minimum wage to
Promote employment. Yes or no? Justify your answer.