cards falls, the quantity of financial capital supplied in the credit card market will decrease and the quantity

demanded will increase.

Equilibrium in Financial Markets

In the financial market for credit cards in Figure 4.5, the supply curve (S) and the demand curve (D) cross at

the equilibrium point (E). The equilibrium occurs at an interest rate of 15%, where the quantity of funds

demanded and the quantity supplied are equal at an equilibrium quantity of $600 billion.

If the interest rate (remember, this measures the “price” in the financial market) is above the equilibrium level,

then an excess supply, or a surplus, of financial capital will arise in this market. For example, at an interest rate

of 21%, the quantity of funds supplied increases to $750 billion, while the quantity demanded decreases to

$480 billion. At this above-equilibrium interest rate, firms are eager to supply loans to credit card borrowers,
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