Determining Market Equilibrium

Oct 13, 2025 by vinooalluri.com 78 views

Market equilibrium is a fundamental concept in economics that describes the point at which the supply and demand for a particular good or service are equal. It is the price at which the quantity of the good or service that consumers are willing to buy (demand) is equal to the quantity that producers are willing to sell (supply). In this article, we will explore the concept of market equilibrium and determine at what price it will occur in a given table.

Understanding the Table

The table below represents the market demand and supply schedules for a particular good or service.

Price	Quantity Demanded	Quantity Supplied
$10	100	50
$12	80	60
$14	60	70
$16	40	80
$18	20	90
$20	0	100

Determining Market Equilibrium

To determine the market equilibrium, we need to find the price at which the quantity demanded is equal to the quantity supplied. This can be done by looking for the point at which the two lines intersect.

Price	Quantity Demanded	Quantity Supplied
$10	100	50
$12	80	60
$14	60	70
$16	40	80
$18	20	90
$20	0	100

From the table, we can see that the quantity demanded and quantity supplied are equal at a price of $14. This is because at a price of $14, the quantity demanded is 60 units, and the quantity supplied is also 70 units. However, we can see that the quantity demanded is less than the quantity supplied at prices above $14, and the quantity demanded is greater than the quantity supplied at prices below $14.

Analyzing the Results

So, what does this mean? It means that at a price of $14, the market is in equilibrium. This is because the quantity demanded is equal to the quantity supplied, and there is no tendency for the price to change.

Why is Market Equilibrium Important?

Market equilibrium is important because it represents the point at which the market is in balance. It is the price at which the quantity demanded is equal to the quantity supplied, and there is no tendency for the price to change.

Conclusion

In conclusion, market equilibrium is a fundamental concept in economics that describes the point at which the supply and demand for a particular good or service are equal. It is the price at which the quantity demanded is equal to the quantity supplied, and there is no tendency for the price to change. In the table above, the market equilibrium occurs at a price of $14.

Frequently Asked Questions

Q: What is market equilibrium?

A: Market equilibrium is the point at which the supply and demand for a particular good or service are equal.

Q: How is market equilibrium determined?

A: Market equilibrium is determined by finding the point at which the quantity demanded is equal to the quantity supplied.

Q: Why is market equilibrium important?

A: Market equilibrium is important because it represents the point at which the market is in balance.

Q: What is the price at which market equilibrium occurs in the table above?

A: The price at which market equilibrium occurs in the table above is $14.

Q: What happens if the price is above the market equilibrium price?

A: If the price is above the market equilibrium price, the quantity demanded will be less than the quantity supplied, and there will be a tendency for the price to fall.

Q: What happens if the price is below the market equilibrium price?

A: If the price is below the market equilibrium price, the quantity demanded will be greater than the quantity supplied, and there will be a tendency for the price to rise.

References

Mankiw, N. G. (2017). Principles of economics. Cengage Learning.
Krugman, P. R., & Obstfeld, M. (2017). International trade: Theory and policy. Pearson Education.
Samuelson, P. A., & Nordhaus, W. D. (2010). Economics. McGraw-Hill Education.
Market Equilibrium Q&A =========================

In this article, we will continue to explore the concept of market equilibrium and answer some frequently asked questions.

Q: What is market equilibrium?

A: Market equilibrium is the point at which the supply and demand for a particular good or service are equal. It is the price at which the quantity demanded is equal to the quantity supplied, and there is no tendency for the price to change.

Q: How is market equilibrium determined?

A: Market equilibrium is determined by finding the point at which the quantity demanded is equal to the quantity supplied. This can be done by looking at the supply and demand curves and finding the point at which they intersect.

Q: What is the difference between market equilibrium and market disequilibrium?

A: Market equilibrium is the point at which the supply and demand for a particular good or service are equal, while market disequilibrium is the point at which the supply and demand are not equal. In a market disequilibrium, the quantity demanded is either greater than or less than the quantity supplied, and there is a tendency for the price to change.

Q: What happens if the price is above the market equilibrium price?

A: If the price is above the market equilibrium price, the quantity demanded will be less than the quantity supplied, and there will be a tendency for the price to fall. This is because consumers are not willing to pay the higher price, and producers are willing to supply more at the lower price.

Q: What happens if the price is below the market equilibrium price?

A: If the price is below the market equilibrium price, the quantity demanded will be greater than the quantity supplied, and there will be a tendency for the price to rise. This is because consumers are willing to buy more at the lower price, and producers are not willing to supply as much at the lower price.

Q: What is the law of supply and demand?

A: The law of supply and demand states that the price of a good or service will adjust to the point at which the quantity demanded is equal to the quantity supplied. This is the fundamental principle of market equilibrium.

Q: What is the concept of elasticity of demand?

A: The concept of elasticity of demand refers to how responsive the quantity demanded is to changes in the price of a good or service. If the quantity demanded is highly responsive to changes in price, it is said to be elastic. If the quantity demanded is not very responsive to changes in price, it is said to be inelastic.

Q: What is the concept of elasticity of supply?

A: The concept of elasticity of supply refers to how responsive the quantity supplied is to changes in the price of a good or service. If the quantity supplied is highly responsive to changes in price, it is said to be elastic. If the quantity supplied is not very responsive to changes in price, it is said to be inelastic.

Q: What is the difference between a perfectly competitive market and a monopolistically competitive market?

A: A perfectly competitive market is a market in which there are many firms producing a homogeneous product, and no single firm has the power to influence the market price. A monopolistically competitive market is a market in which there are many firms producing a differentiated product, and each firm has some degree of market power.

Q: What is the concept of market failure?

A: Market failure is a situation in which the market does not allocate resources efficiently. This can occur due to a variety of reasons, including externalities, public goods, and information asymmetry.

Q: What is the concept of government intervention in markets?

A: Government intervention in markets refers to the use of government policies and regulations to influence the behavior of firms and consumers in a market. This can include policies such as taxes, subsidies, and regulations.

Conclusion

In conclusion, market equilibrium is a fundamental concept in economics that describes the point at which the supply and demand for a particular good or service are equal. It is the price at which the quantity demanded is equal to the quantity supplied, and there is no tendency for the price to change. We have also discussed some frequently asked questions related to market equilibrium and other related concepts.

References

Mankiw, N. G. (2017). Principles of economics. Cengage Learning.
Krugman, P. R., & Obstfeld, M. (2017). International trade: Theory and policy. Pearson Education.
Samuelson, P. A., & Nordhaus, W. D. (2010). Economics. McGraw-Hill Education.