Putting It Together
After completing this module, you should realize that the $1.40 per gallon price is the equilibrium price for this system. This is where the Quantity Demanded equals the Quantity Supplied. If we were to drop the price to $1.20, then there would be more demand than supply. Basically, we would not have enough on hand to meet the amount that people want. We would be leaving money on the table (i.e. if we made more it would sell). If we raise the price to $1.60 then there would be less demand than supply. This would basically mean extra product sitting on shelves or in a warehouse. This is all money lost since we make more than people actually want and we have already spent that money to produce the product which no one is going to buy.Licenses & Attributions
CC licensed content, Original
- Authored by: Paul Jones and Lumen Learning. License: CC BY: Attribution.
