ABSTRACT
Chapter 5 presents the market equilibrium of demand and supply. If the market is in excess supply, the market price would fall, and the quantity demanded would increase while the quantity supplied would decrease. If the market is in excess demand, the market price would increase, and the quantity demanded would decrease while the quantity supplied would rise. If the demand shifts, the effect on price would be largest if supply is inelastic and the effect on quantity would be largest if supply is elastic. If the supply shifts, the effect on price would be largest if demand is inelastic and the effect on quantity would be largest if demand is elastic. An intermediary increases the price that buyers pay and reduces the price that sellers receive. Perfect competition ensures that the allocation of resources is economically efficient.
