Basics of Market system and market

equilibrium

Gaurav Gupta
Concept of market

 Connaught place
 Karol bagh
 DSE
 BSE

 Geographical area of a market depends on

how far and wide are the buyers and seller
scattered.
Demand side of the market

 The demand side of the market for a product

refers all of its consumer and the price that
they are willing to pay for buying a certain
quantity.
 The quantity that consumer buy at a certain
price determines the market size.
 When price goes up ,demand goes down and
size of the market is reduced.
 Similarly when price decrease ,demand increase
,market increase

Quantity demanded of a commodity depends also on

so many factors consumer income, price of the
substitute and complementary goods etc.
current price is the most important determinant of
the demand.
Law of demand / Monthly schedule for
shirt

Price Quantity

800 8

600 15

400 30

300 40

200 55

100 80
Page 105 DND

shirts
Supply side of the market

 While buyer of a product constitute the demand

side seller or producer of the product make the
supply side.
 Supply means the quantity of a product that its
producers or seller offer for sale at a given time per
unit of time.
 Is the sum of supplies of a commodity made by all
individual firm or their supply agencies.
 Supply depends on its price and cost of
production.

 Law of supply :
 The supply of a product increases with the
increase in its price and decrease with
decrease in its price other thing remain
constant.
 Thus demand and its price negatively related
.

 Supply and its price positively related.

Supply side

Price Shirts
100 10
200 35
300 50
400 60
600 75
800 80
price

shirts
Market equilibrium

 Equilibrium means the state of rest.

 Equilibrium refers to the state of market in
which quantity demanded of a commodity
equal to quantity supplied of the commodity.
Price demand supply market Effect on
price
100 80 10 shortage Rise

200 55 28 shortage rise

300 40 40 equilibrium stable

400 28 50 surplus fall

500 20 55 surplus fall

600 15 60 surplus fall