#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
Algebraically, we can find equilibrium price by setting the demand function equal to the supply function and solving for price. Recall that in our hypothetical example of a local gasoline market, the demand function was given by Qdx=f(Px,I,Py) , and the supply function was given by Qsx=f(Px,W)
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3.6. Market Equilibrium
ept, as indicated by the shaded arrows. But for all quantities above Q∗x , the lowest price willingly accepted by sellers is greater than the highest price willingly offered by buyers. Clearly, trades will not be made beyond Q∗x. <span>Algebraically, we can find equilibrium price by setting the demand function equal to the supply function and solving for price. Recall that in our hypothetical example of a local gasoline market, the demand function was given by Qdx=f(Px,I,Py) , and the supply function was given by Qsx=f(Px,W) . Those expressions are called behavioral equations because they model the behavior of, respectively, buyers and sellers. Variables other than own price and quantity are determined ou