Determination of Equilibrium Price
Equilibrium is a balance between quantity and price, it is a situation where there is no change.
Equilibrium price is the price at which the quantity supplied is equal to the quantity demanded. In the process of buying and selling, a lot of bargaining takes place between buyers and sellers. The bargaining continues until both parties reach an agreement on the quantity and price. In other words, the forces of supply and demand operate in order to fix the price of a 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