Market equilibrium

Market equilibrium is a condition in which buyers’ planned purchases equal sellers’ planned sales at prevailing prices. In the standard supply-and-demand model, it occurs where the two curves intersect.

Supply and demand: A model of how prices and quantities arise from buyers’ demand and sellers’ supply. Its curves show how planned purchases and sales meet at an equilibrium.
Demand curve: A graph or function relating the price of a good to the quantity buyers are willing and able to purchase. It represents planned purchases across possible prices.
Monopoly: A market structure in which a single seller faces no close rival for its product. A monopolist can restrict output and choose price rather than take a competitive market price.
Consumer surplus: The difference between what buyers are willing to pay and what they actually pay. At equilibrium, it measures buyers’ gains from trades made at the market price.
Market-clearing price: The price at which quantity demanded equals quantity supplied in a market. At this price, planned purchases equal planned sales.
Supply curve: A graph or function relating the price of a good to the quantity sellers are willing and able to offer. It represents planned sales across possible prices.
Price ceiling: A legal maximum price imposed on a good or service. A binding ceiling can keep the market price below its clearing level and produce a shortage.
Producer surplus: The difference between the price sellers receive and the minimum they would accept. At equilibrium, it measures sellers’ gains from market transactions.
Excess supply: A condition in which quantity supplied exceeds quantity demanded at a given price. Surplus inventory can push prices toward equilibrium.
Willingness to pay: The maximum price a buyer is prepared to pay for a good or service. It helps determine the demand underlying equilibrium.

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