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Key Notes: Market Equilibrium | Economics Class 11 - Commerce PDF Download

Market Equilibrium


It is a situation of the market in which demand for a commodity is exactly equal to its supply

Equilibrium Price


Which corresponds to the quantity between market demand and market supply of a commodity.

Equilibrium Quantity


Which corresponds to the equilibrium price in the market.

Non-viable Industry

The industry for which demand curve and supply do not intersect each other at any positive quantity is called non-viable industry.

Viable Industry


In case of viable industry supply and demand curve must intersect at same point.

Price Ceiling

Price ceiling means maximum price oi a commodity that the seller can charge from the buyers. Often the government fixes this price much below the equilibrium market price of a commodity, so that it becomes within the reach of the poorer sections of the society.

Price Floor


It means the minimum price fixed by tlm gevernment for a commodity in the market. It seems paradoxical.
(i) Each firm employs labour up to the point where the marginal revenue product of labour equals the wage rate.
(ii) With supply curve remaining unchanged when demand curve shifts rightward (leftward), the equilibrium quantity increases (decreases) and equilibrium price increases with fixed number of firms.
(iii) With demand curve remaining unchanged when supply curve shifts rightward (leftward), the equilibrium quantity increases (decreases) and equilibrium price decrease (increases) with fixed number of firm.

Effect of a Simultaneous Change in Demand and Supply on Equilibrium Price

(i) When demand increases more than supply, equilibrium price will increase.
(ii) When demand and supply increases equally, equilibrium price remain constant.
(iii) When supply increases more than demand, equilibrium price falls.

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