Equilibrium Price

Posted in Marketing and Strategy Terms, Total Reads: 453

Definition: Equilibrium Price

The Equilibrium price is the price at which the market forces of Demand and Supply match exactly i.e. the quantity of goods demanded is equal to the quantity supplied.If we see as per the Demand Supply Curve, it is the point at which the demand and supply graphs intersect with each other.

If Price < Equilibrium Price means the quantity demanded would exceed the supplied quantity means there is a shortage in the market. This would push the price higher. 

On the other hand if Price>Equilibrium Price, it means the supplied quantity is more than the demanded means surplus. This would lower the price. 

The tendency of the market price would always be to attain Equilibrium Price.

Government regulations will create surpluses and shortages in the market. When a price ceiling is set, there will be a shortage. When there is a price floor, there will be a surplus.


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