Question

For Market Analysis Solution:

draw graph and label P, Q, D, S, Pe, Qe and name of market.

price, quantity, demand, supply, Pe ?, and Qe ?

Answer 1

See the following graph carefully:



Now, let us understand the below even more carefully:

P:
P is the OY axis, showing different prices in $ on the scale from O to Y.

Q:
Q is the OX axis, showing different quantities in units on the scale from O to X.

D:
Green curve labeled as DD is our demand curve in the market. It has a negative slope i.e. falling down from left to right. It's so because of the law of demand. You see, consumers demand more at low price; and demand less at high prices.

S:
Blue curve labeled as SS is our supply curve in the market. It has a positive slope i.e. rising up from left to right. It's so because of the law of supply. You see, producers supply more at high price; and supply less at low prices.

Pe:
This is our equilibrium price. See horizontal orange line, which originates from the intersection point of DD and SS, and ends at OY axis. OPe is our equilibrium price in the market.

Qe :
This is our equilibrium quantity. See the vertical orange line, which originates from the intersection point of DD and SS, and ends at OX axis. OQe is our equilibrium quantity in the market.

E:
E is the point where we get the market equilibrium. It's where demand and supply become equal to each other.