When analyzing the market for a product / service, as one of the equilibrium indicators, it is necessary to calculate the equilibrium price, i.e. such a price for a product or service at which demand in the market will be equal to supply. This can be done in two ways: by calculation or graphically.
It is necessary
- calculator
- ruler
- pencil
Instructions
Step 1
Write down the functions of demand (usually denoted as Qd) and supply (usually denoted as Qs) operating in the studied market of the product / service. To find the equilibrium price graphically, plot supply and demand curves on the graph (in this case, it is customary to plot the price of a product or service on the vertical axis of ordinates, and volume on the horizontal axis of abscissa).
Step 2
Since in equilibrium in the market, demand is equal to supply, equate the right sides of the supply and demand equations with each other. Equality will graphically be located at the intersection of the supply and demand curves.
Step 3
After solving the equation, find the value of the equilibrium price for the market under study. Any price for the product or service under consideration, which is higher than the equilibrium one, will cause an oversupply in the market, since producers interested in profit will increase the volume of production, and buyers will be less willing to purchase this product. If the price is lower than the equilibrium price, then the supply deficit will begin in the market, since the demand for the product will increase, but not all sellers will want to sell the product with less profit. In this case, on the graph, the equilibrium price of the goods will be the value of the point of intersection of the supply and demand curves on the vertical axis.
