Price determination
Introduced| English | Meaning |
|---|---|
| equilibrium/ˌiːkwɪˈlɪbrɪəm/ | A state in which opposing influences balance so there is no tendency for the relevant quantities to change. |
| quantity demanded/ˈkwɒntɪti dɪˈmændɪd/ | The amount buyers are willing and able to purchase at a particular price over a specified period. |
| quantity supplied/ˈkwɒntɪti səˈplaɪd/ | The amount sellers are willing and able to offer at a particular price over a specified period. |
| shortage/ˈʃɔːtɪdʒ/ | A situation in which quantity demanded exceeds quantity supplied at the prevailing price. |
| surplus/ˈsɜːpləs/ | An amount exceeding what is required; in a market, quantity supplied above quantity demanded at a given price. |
| clears/klɪəz/ | Describes a market when quantity demanded equals quantity supplied at the prevailing price. |
Where buyers and sellers agree
- Buyers want low prices; sellers want high ones. The market settles at the one price that satisfies both.
- That balancing price is the equilibrium 均衡 — found where supply meets demand.
Market equilibrium is where:
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Equilibrium clears the market — Qd = Qs.
At equilibrium there is neither a shortage nor a surplus.
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The market clears — quantity demanded equals quantity supplied.
Market equilibrium
- Equilibrium is the price where quantity demanded 需求量 = quantity supplied 供给量.
- At that price there is no shortage 短缺 and no surplus 过剩 — the market clears 出清.
Equilibrium is the crossing point: quantity demanded equals quantity supplied.
Demand & supply
Equilibrium is where demand meets supply.
If price is set above equilibrium, the result is a:
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Above equilibrium, supply exceeds demand — a surplus pushes price down.
When supply exceeds demand at the current price, there is a ______.
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Excess supply is a surplus, which pushes price down.
Surplus pushes price down
- If price is above equilibrium, supply exceeds demand → a surplus → sellers cut prices.
- The price falls back towards equilibrium.
Above equilibrium there is excess supply (a surplus); below it, excess demand (a shortage)
A shortage occurs when price is:
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Below equilibrium, demand exceeds supply — a shortage pushes price up.
Shortage pushes price up
- If price is below equilibrium, demand exceeds supply → a shortage → buyers bid prices up.
- The price rises back towards equilibrium.
Worked example. Concert tickets priced too low sell out instantly (a shortage) and reappear on resale sites at much higher prices — the market pushing back to equilibrium.
You've got it
- equilibrium: quantity demanded = quantity supplied; the market clears
- price above equilibrium → surplus → price falls
- price below equilibrium → shortage → price rises