equilibrium price
the price that balances quantity supplied and quantity demanded
Equilibrium price refers to the price at which the quantity of a good or service supplied is equal to the quantity demanded by consumers. At this price, there is no surplus or shortage of the product in the market.
The determination of equilibrium price is influenced by the forces of supply and demand. When the demand for a product is high, but the supply is limited, the price of the product tends to increase. Conversely, if the supply exceeds the demand, the price of the product tends to decrease.
The process of determining the equilibrium price relies on market interaction between buyers and sellers. Buyers aim to purchase the product at the lowest possible price, while sellers aim to sell the product at the highest possible price. The meeting point of these two forces in the market results in the equilibrium price.
The equilibrium price is important as it ensures that the market clears, and all the goods produced are consumed by buyers. Furthermore, it is a signal for producers about how much of the product to supply to the market.
In summary, the equilibrium price is the market price where the quantity supplied equals the quantity demanded, determined by the interaction of supply and demand forces in a market economy.
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