Market equilibrium

0
11KB

Key points

  • Supply and demand curves intersect at the equilibrium price. This is the price at which we would predict the market will operate.

Where demand and supply intersect

Because the graphs for demand and supply curves both have price on the vertical axis and quantity on the horizontal axis, the demand curve and supply curve for a particular good or service can appear on the same graph. Together, demand and supply determine the price and the quantity that will be bought and sold in a market.
 
The demand curve, D, and the supply curve, S, intersect at the equilibrium point E, with an equilibrium price of 1.4 dollars and an equilibrium quantity of 600. The equilibrium is the only price where quantity demanded is equal to quantity supplied. At a price above equilibrium, like 1.8 dollars, quantity supplied exceeds the quantity demanded, so there is excess supply. At a price below equilibrium, such as 1.2 dollars, quantity demanded exceeds quantity supplied, so there is excess demand.
We can also find the equilibrium price by looking at a table.
Price per gallon Quantity supplied in millions of gallons Quantity demanded in millions of gallons
dollar sign, 1, point, 00 500 800
dollar sign, 1, point, 20 550 700
start color #df0030, dollar sign, 1, point, 40, end color #df0030 start color #df0030, 600, end color #df0030 start color #df0030, 600, end color #df0030
dollar sign, 1, point, 60 640 550
dollar sign, 1, point, 80 680 500
dollar sign, 2, point, 00 700 460
dollar sign, 2, point, 20 720 420
The equilibrium price is the only price where the plans of consumers and the plans of producers agree—that is, where the amount consumers want to buy of the product, quantity demanded, is equal to the amount producers want to sell, quantity supplied. This common quantity is called the equilibrium quantity. At any other price, the quantity demanded does not equal the quantity supplied, so the market is not in equilibrium at that price.
The word equilibrium means balance. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point. However, if a market is not at equilibrium, then economic pressures arise to move the market toward the equilibrium price and the equilibrium quantity.
Check out this video to see a discussion of how the interaction between supply and demand leads to an equilibrium price.
Rechercher
Catégories
Lire la suite
Middle East
Top 10 Best Countries for Expats in 2023
As part of the InterNations study, expats rated the countries of their temporary stay depending...
Par FWhoop Xelqua 2023-03-31 17:50:35 0 19KB
Business
Why Do I Want to Start a Business?
Starting a business is a big decision—one that involves time, effort, and often a...
Par Dacey Rankins 2025-02-05 15:53:48 0 7KB
Business
What Is a Startup Accelerator?
In the fast-paced world of entrepreneurship, early-stage companies often need a boost to refine...
Par Dacey Rankins 2025-04-22 15:36:28 0 6KB
Programming
Reddit API Pricing
Reddit began shutting down some third-party apps after weeks of outrage over its API pricing...
Par Jesse Thomas 2023-07-10 23:45:44 0 10KB
Colleges and Universities
Keeping Up with Higher Education: Latest News from Colleges and Universities
Keeping Up with Higher Education: Latest News from Colleges and Universities In the...
Par Leonard Pokrovski 2024-05-03 21:44:11 0 17KB
image/svg+xml


BigMoney.VIP Powered by Hosting Pokrov