Market Equilibrium - Supply Analysis, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

What is market equilibrium?
It's when quantity demanded equals to quantity supplied
at a given price
Can you guess where's the market equilibrium here?
Yes, at $3, both Qd and Qs are equal, at 6
Plot the values into a graph...
And this is simply the intersection
between the demand and supply curves.
Wow,
when the amount the sellers want to sell
is equal to the amount the buyers want to buy
Everyone is happy
Price is stable at market equilibrium
Anywhere else, price tends to change
At a price below market equilibrium
say, at $2, sellers want to sell this amount
Buyers? This amount
There's a shortage
As sellers, with so many customers fighting to buy your goods
Sit back and wait and jack up the price, boy!
As price increases
some buyers drop out
More sellers enter
Oh... back to market equilibrium
At a price above market equilibrium
Say, at $5
sellers want to sell this amount
Buyers? This amount
Eww... There's a surplus
With so few buyers
Better drop your price
Or risk not selling your apples at all
As price drops
some sellers drop out and more buyers enter
Oh... back to market equilibrium. Again!
So the market equilibrium price is the only point
where price is stable
Wait a minute...
What happens if we have this super powerful firm
that can influence price?
Well
we assume we have a competitive market
There are many similar sellers and buyers
With so many of them, none can influence price
They are price takers
The market sets the price
And here's the summary
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Next up: Shifts in demand and supply curves