Market equilibrium

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Introduction to market equilibrium

"The logic of the model of demand and supply is simple. The demand curve shows the quantities of a particular good or service that buyers will be willing and able to purchase at each price during a specified period. The supply curve shows the quantities that sellers will offer for sale at each price during that same period. By putting the two curves together, we should be able to find a price at which the quantity buyers are willing and able to purchase equals the quantity sellers will offer for sale." - Principles of Microeconomics

When left alone, a market will move to equilibrium; in other words, the market price will move to the level at which the quantity supplied equals the quantity demanded. However, this outcome can be both desirable and undesirable for buyers or sellers.


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Activity

Principles of Microeconomics: "Chapter 3, Section 3: Demand, Supply, and Equilibrium"

  • Read this section to learn how demand and supply interact with one another to determine prices and quantities that may or may not be optimal. Attempt the "Try It” problem. Take a moment to read through the stated learning outcomes for this chapter of the text, which you can find at the beginning of each section. These outcomes should be your goals as you read through the chapter.



Market equilibrium


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Activity

Khan Academy: "Market Equilibrium"

  • Watch this video about market equilibrium.



Simultaneous shifts in supply and demand


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Activity

Khan Academy: "Changes in Market Equilibrium"

  • Watch this video about changes in market equilibrium.



Putting demand and supply to work


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Activity

Principles of Microeconomics: "Chapter 4, Section 1: Putting Demand and Supply to Work"

  • Read this section to learn about some applications of the demand and supply model. Attempt the "Try It” problem.

Boundless: "Introducing Supply and Demand"

  • Read each section of this chapter for a mathematical exposition of the demand and supply model. The chapter also covers price ceilings and price floor analysis as well as quantity regulations.