There is neither a shortage nor a surplus of apples. There are no
unsatisfied buyers to bid the price up, nor are there unsatisfied sellers to
force the price down. Once the price of $60 has been reached, therefore,
there will be no tendency for it to change.
Equilibrium implies a state of rest, or balance, between opposing forces.
The equilibrium price is the one toward which the actual market price
will tend. Once established, it will persist until it is disturbed by some
change in market conditions that shifts the demand curve, the supply
curve, or both.
The price at which the quantity demanded equals the quantity supplied is called the
equilibrium price, or the market-clearing price. [ 5 ]Any price at which the market does not “clear”—that is, quantity
demanded does not equal quantity supplied—is called a disequilibrium
price. Whenever there is either excess demand or excess supply in a
market, that market is said to be in a state of disequilibrium and the
market price will be changing.
Figure 3-7 makes it clear that the equilibrium price occurs where the
demand and supply curves intersect. Below that price, there is excess
demand and hence upward pressure on the existing price. Above that
price, there is excess supply and hence downward pressure on the
existing price.
3 When economists graph a demand (or supply) curve, they put the variable to be explained (the
dependent variable) on the horizontal axis and the explanatory variable (the independent
3