Professional Documents
Culture Documents
MANAGERIAL ECONOMICS
College of Education
School of Continuing and Distance Education
2014/2015 – 2016/2017
Session Overview
• We have looked at the behavior of the consumer separately
through the concept of demand and the behavior of the
producer separately through the concept of supply. In the real
market, the producer and the consumer will interact. Through
their interaction, sometimes, how much consumers are willing
to buy will be more than what producers are willing to put on
the market for sale. Other times, how much producers will
want to put on the market for sale will exceed that of
consumers. There will be one price at which how much
consumers are willing to put on the market for sale is just
equal to how much consumers are willing to buy. This is the
equilibrium price. This price gives a state of rest and will have
no tendency to change unless an external shock occurs.
• Example: Assume that price of milo rises, how will this affect the
market equilibrium for “this way” chocolate drink?