Market equilibrium
Also called: equilibrium price, market-clearing price
Market equilibrium is the price at which the quantity buyers want equals the quantity sellers offer, so there's no shortage or surplus.
Prices above equilibrium leave unsold goods, which pushes prices down; prices below it cause shortages, which push prices up.
Related terms
- Supply and demand: Supply and demand is the model that explains prices: when more people want something than is available, its price rises; when more is available than people want, its price falls.
- Consumer surplus: Consumer surplus is the difference between what buyers would be willing to pay and what they actually pay.
- Price ceiling: A price ceiling is a legal maximum price, like rent control; a price floor is a legal minimum, like a minimum wage.
Guides
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.