Equilibrium Price
Equilibrium price is the price at which the demand for a product or service is equal to the supply of the same product or service. It is the point at which the market is in balance, and the forces of supply and demand are equal. The equilibrium price is determined by the intersection of the demand and supply curves. At this point, the quantity of the product or service that consumers are willing to buy is equal to the quantity that producers are willing to supply. The equilibrium price is also known as the market-clearing price, as it clears the market of any excess supply or demand.
History of Equilibrium Price
The concept of equilibrium price has its roots in the work of 18th century economist Adam Smith. Smith argued that the price of a good or service is determined by the forces of supply and demand. He believed that the price of a good or service would eventually reach a point where the quantity of the good or service that consumers are willing to buy is equal to the quantity that producers are willing to supply. This point is known as the equilibrium price.
The concept of equilibrium price was further developed by 19th century economist Alfred Marshall. Marshall argued that the price of a good or service is determined by the interaction of supply and demand. He believed that the price of a good or service would eventually reach a point where the quantity of the good or service that consumers are willing to buy is equal to the quantity that producers are willing to supply. This point is known as the equilibrium price.
Comparison Table
Equilibrium Price | Market-Clearing Price |
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The price at which the demand for a product or service is equal to the supply of the same product or service. | The price at which the market is in balance, and the forces of supply and demand are equal. |
Summary
Equilibrium price is the price at which the demand for a product or service is equal to the supply of the same product or service. It is the point at which the market is in balance, and the forces of supply and demand are equal. The equilibrium price is determined by the intersection of the demand and supply curves. For more information about this term, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Supply and Demand
- Price Elasticity of Demand
- Price Elasticity of Supply
- Marginal Revenue
- Marginal Cost
- Average Revenue
- Average Cost
- Consumer Surplus
- Producer Surplus
- Deadweight Loss