Equilibrium Price and Quantity

Equilibrium occurs at the intersection of the market supply and market demand curves.At this intersection, quantity demanded equals quantity supplied ie., the quantity producers and willing to supply. A surplus exists at prices higher than the equilibrium price since the quantity demanded falls short of the quantity supplied. At price lower than the equilibrium price, there is a shortage of output since quantity demanded exceeds quantity supplied.Once achieved,the equilibrium price and quantity persist until there is a change in demand and/or supply.

Equilibrium price and/or equilibirum quantity change when the market demand and/or market supply curves shift. Equilibrium price and equilibrium quantity both rise when there is an increase in market demand with no change in market supply curve.Equilibrium price falls while equilibrium quantity increases when market supply increases and demand is unchanged.