1. Equilibrium price equalizes demand and supply.

2. Supply is constant in very short period.


1. Equilibrium price.

There is only one price at which the preferences of seller and buyer meet together.

At a particular price, the quantity demanded and a quantity supplied will become equal.

At this price quantity bought and quantity sold will be equal.

2. Short periods

During the short period, supply can be altered to some extent only.

Supply cannot be fully altered to the demand changes.

Raising demand increases the price lightly and a falling demand decreases the price slightly.


1. How is the equilibrium price determine?

  • It is clear from the table given below that demand decreases and supply increases when the price rises.
  • At this price the quantity bought (demand) and the quantity sold ( supply) will be equal.
  • This price equalizes the demand and supply
Price(in Rs) Demand(in kilos) Supply(in kilos)
20 5 1
40 4 2
60 3 3
80 2 4
100 1 5
  • When the price of mangoes is Rs.20 per kg, demand is 5 kg and the supply is 1 kg.
  • When the price raises to Rs 40, 60, 80, 100 and the demand decreases to 4, 3, 2, 1 kg and the supply raises to 2, 3, 4, 5 kg.
  • At a particular price the demand and supply are equal that is 3 kg.
  • This price is called equilibrium price and the quantity is called equilibrium quantity.