In the second lesson on linear demand equations we’ll learn how to use the equation to find the exact quantity demanded at any price. We’ll also learn what the “price-intercept” is, its significance and how it can easily be determined using the demand equation.
As we’ve learned in earlier lessons, markets tend to achieve equilibrium prices and quantities that are efficient, as the marginal benefit of a product to its consumers equals the marginal cost to producers. But what makes outcomes other than equilibrium inefficient? This lesson looks at the impact of disequilibria on consumer and producer surplus, introducing the concept of “deadweight loss” or “welfare loss”, which will further help us understand what makes outcomes other than the equilibrium quantity and price inefficient.