Price determination
Equilibrium
- The price is set where demand and supply meet — they cross at one point.
- This gives:
- the equilibrium price — where quantity demanded = quantity supplied,
- the equilibrium quantity — the amount traded.
- At equilibrium there's nothing left over and no buyer left waiting.
Practice
The equilibrium price is where:
Equilibrium is where the demand and supply curves cross, so the two quantities are equal.
Practice
At the equilibrium price there is no surplus left over and no buyer left waiting.
Quantity demanded equals quantity supplied, so the market just clears.
Practice
On a diagram, the equilibrium is found:
The crossing point of the two curves gives the equilibrium price and quantity.
You've got it
Key idea
- the equilibrium is where the demand and supply curves cross
- at it, quantity demanded = quantity supplied
- it sets the equilibrium price and equilibrium quantity