Determination of Equilibrium Price and Quantity

Equilibrium is a balanced state.

Equilibrium Price:

Equilibrium price is the price at which the quantity supplied is equal to the quantity demanded, where the price corresponds to the point of intersection of demand and the supply curve. In other words, the two forces of supply and demand operate in order to fix the price of the commodity.

The price at which sellers are willing to supply, and buyers are willing and able to buy is called the equilibrium or market price. This can be shown in the diagram below:

Equilibrium Quantity:

Equilibrium quantity is when the quantity demanded is equal to quantity supplied where the quantity corresponds with the point of intersection between the demand and supply curve.

Demand and Supply Schedule:

In the above table, the price ₦60 is the equilibrium price while 280 units is the equilibrium quantity. At the price of ₦80, consumers will be willing to purchase the quantity of 200 units while producers are willing to supply 300 units. Surplus therefore occurs. This means that the quantity supplied is greater than the quantity demanded. Producers will bring down the price to get rid of excess supply.

In the same way, at the price of ₦40, consumers are willing to purchase 380 units of the commodity while producers are ready to supply 180 units. Since the quantity demanded is greater than quantity supplied, the price will rise but not beyond ₦60, where quantity supplied is equal to quantity demanded. There is neither a shortage nor a surplus; at that price, there is no tendency to change.