Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

18 DEMAND, SUPPLY, AND EQUILIBRIUM: AN OVERVIEW [CHAP. 2
2.8 THE MARKET SUPPLY OF A COMMODITY
The market or aggregate supply of a commodity gives the alternative amounts of the commodity supplied
per time period at various alternative prices by all the producers of this commodity in the market. The market
supply of a commodity depends on all the factors that determine the individual producer’s supply and, in
addition, on the number of producers of the commodity in the market.
EXAMPLE 10. If there are 100 identical producers in the market, each with a supply of commodity X given by
Qs x ¼ 40 þ 20P x cet: par. (see Example 7), the market supply (QS x ) is obtained as follows (see also Table 2.5 and Fig. 2-5):
Qs x ¼ 40 þ 20P x cet: par: (single producer’s s x )
QS x ¼ 100(Qs x ) cet: par: (market S x )
¼ 400 þ 2000P x
Table 2.5
P x ($) QS x
6 8000
5 6000
4 4000
3 2000
2 0
Fig. 2-5
The market supply curve (S x ) will shift when the individual producer’s supply curves shift and when, over time, some producers
enter or leave the market.
2.9 EQUILIBRIUM
Equilibrium refers to the market condition which, once achieved, tends to persist. In economics this occurs
when the quantity of a commodity demanded in the market per unit of time equals the quantity of the commodity
supplied to the market over the same time period. Geometrically, equilibrium occurs at the intersection of
the commodity’s market demand curve and market supply curve. The price and quantity at which equilibrium
exists are known, respectively, as the equilibrium price and the equilibrium quantity.
EXAMPLE 11. From the market demand curve of Example 6 and the market supply curve of Example 10, we can determine
the equilibrium price and the equilibrium quantity for commodity X as shown in Table 2.6 and Fig. 2-6. At the equilibrium
point, there exists neither a surplus nor a shortage of the commodity and the market clears itself. Ceteris paribus, the
equilibrium price and the equilibrium quantity tend to persist in time.
Table 2.6
P x ($) QD x QS x
6 2000 8000
5 3000 6000
4 4000 4000
3 5000 2000
2 6000 0
Equilibrium