Disequiblirum

What are the consequences of a disequilibrium market?

So disequilibrium is when quantity supplied does not = quantity demanded.

So we could have excess supply (this means there's more quantitiy supplied than there is quantity demanded).

Well if producers are supplying more stuff than is being demanded... they're not going to sell everything they make, so it's going to waste. This waste is a negative consequence.

We could also have excess demand (this means there's more quantitiy demanded than there is quantity supplied).

In other words... lots of consumers are demanding the good, but there's not enough being supplied. Now consumers are unhappy because they can't get the products they want.

Let me know if you'd like me to explain how we move back to EQUILIBRIUM via the price mechanism and if you have any more qs - super happy to help

yes please I will like to know that as well, how we move back to Equilibrium via the price mechanism. Thank u

Sure no problem, and just PM me if you have any further questions - happy to share my revision tips and stuff that helped me get 100% last year in my AS.

So let's suppose there is "excess supply" - this occurs when the price is ABOVE equilibrium.

That means there is more quantity being supplied than being demanded.

Imagine you're a shopkeeper and you have 20 bananas to supply but only 12 are being demanded, and you're charging 80p per banana.

8 of your bananas are going to waste because people aren't buying them

So how would you change your price?

Well you'd reduce your price to sell of the excess supply of bananas! And so the price will fall back to the equilibrium price (PM if you need a full explanation).

Okay, so now let's consider "excess demand" - this occurs when the price is BELOW equilibrium.

That means there is more quantity being demanded than being supplied.

So imagine you're a consumer and you demand 20 bananas but the shopkeeper is only supplying 12 bananas for 40p each.

There is excess demand of 8 bananas - you're not getting all the bananas you want

So to get the shopkeeper to supply more bananas, how might you change the price you offer him?

Well you'll offer him a HIGHER price! That way he's motivated to supply more bananas to you.

So when there's excess demand the price will rise back to the EQUILIBRIUM price!

evaluate the effects of full employment.?

Hey! That's quite a vague question that wouldn't come up in the exam.

Could you tell me where you found it?

Please PM me with any further questions by the way - happy to help