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#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
To reach equilibrium, price must adjust until there is neither an excess supply nor an excess demand. That adjustment is called the market mechanism , and it is characterized in the following way: In the case of excess supply, price will fall; in the case of excess demand, price will rise; and in the case of neither excess supply nor excess demand, price will not change.
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3.7. The Market Mechanism: Iterating toward Equilibrium—or Not
t buyers are willing to purchase 5,400 more units than sellers are willing to offer. This result is shown in Exhibit 9. Exhibit 9. Excess Demand as a Consequence of Price below Equilibrium Price <span>To reach equilibrium, price must adjust until there is neither an excess supply nor an excess demand. That adjustment is called the market mechanism , and it is characterized in the following way: In the case of excess supply, price will fall; in the case of excess demand, price will rise; and in the case of neither excess supply nor excess demand, price will not change. EXAMPLE 7 Identifying Excess Demand or Excess Supply at a Non-equilibrium Price In the local market for e-books, the aggregate demand i


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