ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Equilibrium price. When a product exchange occurs, the agreed upon price is called an equilibrium price, or a market clearing price. Graphically, this price occurs at the intersection of demand and supply as presented in Image 1.

Detailed explanation-2: -The phrase “equilibrium price” is often used interchangeably with “market clearing price.” Both refer to the price at which the number of goods for sale is exactly equal to the quantity that buyers wish to purchase. In other words, it is the price at which the market is in equilibrium.

Detailed explanation-3: -The equilibrium price is also sometimes called the market-clearing price, because, at this price, everyone in the market has been satisfied: Buyers have bought all they want to buy, and sellers have sold all they want to sell.

Detailed explanation-4: -Equilibrium: Where Supply and Demand Intersect The equilibrium price is the only price where the desires of consumers and the desires of producers agree-that is, where the amount of the product that consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied).

Detailed explanation-5: -A market-clearing price is the price of a good or service at which quantity supplied is equal to quantity demanded, also called the equilibrium price.