<Standard E.2.7 ............................................................................................................................................................................. Standard E.2.9>

Demonstrate how changes in supply and demand influence equilibrium price and quantity in the product, resource, and financial market.


Equilibrium means a state of equality or a state of balance between market demand and supply.
  • Without a shift in demand and/or supply there will be no change in market price.
  • In the diagram, the quantity demanded and supplied at price P1 are equal.
    • At any price above P1, supply exceeds demand and at a price below P1, demand exceeds supply.
    • In other words, prices where demand and supply are out of balance are termed points of disequilibrium.
Changes in the conditions of demand or supply will shift the demand or supply curves. This will cause changes in the equilibrium price and quantity in the market.

A supply and demand curve. The point at which the red and blue lines cross is the equilibrium price
A supply and demand curve. The point at which the red and blue lines cross is the equilibrium price



A simple diagram of equilibrium price and quantity with non-linear supply and demand curves
A simple diagram of equilibrium price and quantity with non-linear supply and demand curves



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