Market Equilibrium
Equilibrium is the price at which the quantity demanded equals the quantity supplied, so the market clears.
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Equilibrium is the price at which the quantity demanded equals the quantity supplied, so the market clears.
- Shortages push prices up
- Surpluses push prices down
- Shifts in demand or supply change equilibrium
🧠 Quick quiz
Three questions. Score 2 or more to complete the topic.
What is Market Equilibrium?
Within Economics & Civics, which covers money, markets, business, government, law and citizenship: how societies are organised and run, this topic explains Market Equilibrium. Economics and civics topics explain how money, markets, laws and government affect people, so each topic here pairs a clear definition with a model.
Check that you can explain Market Equilibrium in your own words and give one example from everyday life. If you can do that, you have understood the core idea.
Understanding Market Equilibrium helps you read the news critically and weigh up policies, choices and arguments about society.
Market Equilibrium in detail
Market equilibrium is where the quantity demanded equals the quantity supplied, at the equilibrium price, where the demand and supply curves cross. At this price there is no shortage or surplus, so the market clears.
If the price is above equilibrium, there is a surplus (excess supply), which pushes the price down. If it is below, there is a shortage (excess demand), which pushes the price up. When demand or supply shifts, a new equilibrium forms, such as a higher price after a poor harvest. This price mechanism allocates resources without central planning.
How the interactive helps you understand Market Equilibrium
Watch the supply model in the interactive. Use any sliders or buttons it offers to change the values and see how the supply model responds.
Before you change anything, predict the result. Then change one value at a time and check whether your prediction was right. This is a quick way to build a correct mental model of Market Equilibrium.
Real-life uses and examples
- Give a balanced answer about Market Equilibrium by considering more than one point of view.
- Relate Market Equilibrium to a news story about prices, jobs, elections or government spending.
- Use Market Equilibrium to weigh up the pros and costs of a policy or decision.
Common mistakes to avoid
- Confusing a short-term effect with a long-term one.
- Giving an opinion without evidence or a clear economic or civic reason.
- Learning the definition without testing it. Use the quiz and the interactive to check that you can apply the idea.
Frequently asked questions about Market Equilibrium
What is Market Equilibrium?
Equilibrium is the price at which the quantity demanded equals the quantity supplied, so the market clears.
What are the most important points about Market Equilibrium?
The main points are: Shortages push prices up; Surpluses push prices down; Shifts in demand or supply change equilibrium.
Why is Market Equilibrium useful?
Understanding Market Equilibrium helps you read the news critically and weigh up policies, choices and arguments about society.
How can I practise Market Equilibrium?
Open the interactive at the top of this page and change the controls one at a time. Predict the result before each change, then take the three-question quiz. A score of two or more marks the topic as complete on this device.
Which topics are related to Market Equilibrium?
Related topics in Economics & Civics include Types of Economic System, Borrowing and Credit, Taxes.