1.2.6 - Price determination

• Equilibrium price/quantity is where demand equals supply so there are no more market forces bringing about change to price or quantity demanded
• Equilibrium price/quantity

  
• Excess demand

  Price is below P1

  
• Excess demand is when price is set too low so demand is greater than supply
• Excess supply

  • When price is above P1

  
• Excess supply When price is set too high so supply is greater than demand