Market

Up to now, we looked at what causes changes in supply and demand. Now we will be analyzing how changes in price and quantity influence market equilibrium. Market equilibrium is the point at which the supply and demand curve intersects. The intersection of the supply and demand determines the balance in both price and quantity in a market. The market is the process of a group of buyers and sellers exchanging goods and services. As you know the market is full of buyers and sellers all trying to find the best bargain. Buyers want to purchase as many goods at the lowest price possible and sellers want to sell as many goods at the highest price possible. Clearly, both buyers and sellers can't have their way. The market has to share a balance among buyers and sellers creating a compromise in the market. That compromise is in which the intersection of the supply and demand curves balances each other, which is known as equilibrium and as a result market prices or equilibrium price become stable. Because supply and demand can shift and change causing a fluctuation or instability in the market. There is constant change in price and quantity which influence the effect of the market equilibrium. When the quantity is greater than quantity demanded there will be a surplus, which causes the market price to fall. When the quantity demanded is greater than quantity supplied, there will be a storage, which causes the market prices to rises. Remember that the intersection of the supply and demand determines the equilibrium price and equilibrium quantity in the market. Therefore, shortages and surpluses initiate the impact the price and quantity have in the market equilibrium.