Market Equilibrium — Equilibrium Price and Quantity

Statement

At market equilibrium, the demand curve meets the supply curve.

• Equilibrium price is the price of the good or service at market equilibrium. It is derived from the point where the demand curve meets the supply curve.
• Equilibrium quantity is the quantity of the good or service exchanged at market equilibrium. It is derived from the point where the demand curve meets the supply curve.

Notes

Equilibrium is the price and quantity at which the market clears — quantity demanded equals quantity supplied, so there is neither shortage nor surplus and no pressure on price to change. At equilibrium, total revenue (the total money earned by producers) equals total expenditure (the total money spent by consumers); both have the same numerical value, the product of equilibrium price and quantity. How the market is pushed back to equilibrium when price is displaced is the price mechanism.