Equilibrium Price
Definition
Equilibrium price is the market-clearing price where demand equals supply. It is determined by finding the intersection point on a graph where both curves intersect.
Analogy
Picture yourself on an escalator with people going up (demand) and people going down (supply). At some point, they meet and are in balance. That meeting point represents the equilibrium price.
Related terms
Surplus: Occurs when the quantity supplied exceeds the quantity demanded at a given price, resulting in excess supply.
Shortage: Occurs when the quantity demanded exceeds the quantity supplied at a given price, resulting in excess demand.
Price Ceiling: A government-imposed maximum price that can be charged for a good or service, often leading to shortages.
"Equilibrium Price" appears in:
Subjects (1)
Study guides (1)
Practice Questions (4)
- What happens to the equilibrium price and quantity in a market when there is an increase in demand?
- Which of the following is likely to occur if the price in a market is above the equilibrium price?
- What happens to the equilibrium price if there is a increase in supply?
- What happens to the equilibrium price and quantity in a market when there is a decrease in supply?
Resources
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.