MARKET EQUILIBRIUM

Market equilibrium is a situation when the demand for commodities is equal to the supply of a commodity at a given price. There are no further changes in the prices of commodities.

At an equilibrium, Seller meets the expectations of buyers' demand at a particular price.

DIAGRAM:

EXPLANATIONS:

1) Line D is the demand curve, which slopes downward from left to right.

2) Demand curve defines the inverse relationship between price and quantity demanded.

3) Line S is the supply curve, which slopes upwards from left to right.

4) Supply curve defines a direct relationship between quantity supplied and price.

5) At point E demand for a commodity is equal to the supply of commodities which indicates an equilibrium between demand and supply.