Market Mechanism — Part 1: Equilibrium and Changes in Demand and Supply: visual lesson, ISC Class 12 Economics

Lesson

Market Mechanism: Equilibrium Price

Part 1 — how buyers and sellers settle on a price, and what happens when demand or supply changes.

In this lesson you will

Part 1 at a glance

Concept

The equilibrium price is the price at which quantity demanded = quantity supplied. The quantity traded there is the equilibrium quantity.

Imagined Kolhapur mandi: Qd = 120 − 2P, Qs = 3P − 30, so E = (60 t, ₹30).

Diagram

Computed from Qd = 120 − 2P and Qs = 3P − 30.
Price (₹ per kg)	Quantity demanded (t)	Quantity supplied (t)	Situation
20	80	30	Excess demand 50
25	70	45	Excess demand 25
30	60	60	Equilibrium
35	50	75	Excess supply 25
40	40	90	Excess supply 50