Economics, 3rd Edition

SUPPLY AND DEMAND TOGETHER

Having analysed supply and demand separately, we now combine them to see how they determine the 

quantity of a good sold in a market and its price.

Equilibrium

Figure 3.7 shows the market supply curve and market demand curve together. Equilibrium, remember, 

is defined as a state of rest, a point where there is no force acting for change. Economists refer to 

supply and demand as being market forces. In any market the relationship between supply and demand 

exerts force on price. If supply is greater than demand or vice versa, then there is pressure on price 

to change. Market equilibrium occurs when the amount consumers wish to buy at a particular price is 

the same as the amount sellers are willing to offer for sale at that price. The price at this intersection 

is called the