Market equilibrium is the price where quantity demanded equals quantity supplied. On a diagram it is the point where the two curves cross.
This lesson follows movement versus shift in the demand and supply cluster. You will find equilibrium from numbers first, then draw it.
How do I find equilibrium from a schedule?
Look for the price where the two quantity columns match. The price in that row is the equilibrium price, and the shared quantity is the equilibrium quantity.
A fictional market for ikan bakar has this schedule.
| Price per fish | Quantity demanded | Quantity supplied | Result |
|---|---|---|---|
| RM2 | 120 | 40 | Shortage of 80 |
| RM3 | 100 | 70 | Shortage of 30 |
| RM4 | 80 | 80 | Equilibrium |
| RM5 | 60 | 110 | Surplus of 50 |
| RM6 | 40 | 140 | Surplus of 100 |
Equilibrium is RM4 with 80 fish. Check the gaps: at RM3 demand 100 minus supply 70 leaves a shortage of 30, and at RM5 supply 110 minus demand 60 leaves a surplus of 50.
How do I draw it?
- Draw two axes. Put price (RM) on the vertical axis and quantity (fish) on the horizontal axis.
- Plot the demand points and join them with a downward sloping line. Label it D.
- Plot the supply points and join them with an upward sloping line. Label it S.
- Mark the crossing point E.
- Draw dotted lines from E to each axis. Label the price P at RM4 and the quantity Q at 80.
The dotted lines matter. They show that the equilibrium price and quantity come from the crossing point, not from guesses.
What do shortage and surplus look like?
At a price above equilibrium, such as RM5, draw a horizontal line across both curves. The gap between the curves on that line is the surplus: 110 minus 60 is 50 fish.
At a price below equilibrium, such as RM3, the gap between the curves is the shortage: 100 minus 70 is 30 fish. In both cases the market moves back toward E, because sellers cut surplus prices and buyers bid up shortage prices.
The mistake: drawing errors that lose marks
| Fault | Effect | Fix |
|---|---|---|
| Axes swapped | Curves slope the wrong way | Price vertical, quantity horizontal |
| Curves unlabelled | Marker cannot tell D from S | Write D and S at the line ends |
| E not dropped to axes | Equilibrium values are unclear | Add dotted lines and label P and Q |
| Both curves slope up | Shows no understanding of demand | Demand slopes down, supply slopes up |
Also avoid writing “equilibrium price 80” by mixing the columns. The price column holds RM values, and the quantity column holds the numbers of fish.
Check yourself
A fictional teh tarik market has this schedule: at RM1.50 demand is 90 and supply is 50; at RM2.00 demand is 70 and supply is 70; at RM2.50 demand is 50 and supply is 90. Find equilibrium, and state the surplus or shortage at RM2.50.
Answer
Equilibrium is RM2.00 with 70 cups, because demand and supply match in that row.
At RM2.50, supply is 90 and demand is 50, so there is a surplus of 90 − 50 = 40 cups. The price should fall toward RM2.00.
What to study next
Next, see what happens after a curve shifts in explaining changes in price and quantity. To test drawings interactively, use the supply-demand diagram reasoning explorer.
For a teacher to watch you draw and label, see online one-to-one Economics tuition.