Market Equilibrium

The market demand curve indicates the maximum price that buyers will pay to purchase a given quantity of the market product. The market supply curve indicates the minimum price that suppliers would accept to be willing to provide a given supply of the market product. In order to have buyers and sellers agree on the quantity that would be provided and purchased, the price needs to be a right level.

The market equilibrium is the quantity and associated price at which there is concurrence between sellers and buyers. If the market demand curve and market supply curve are displayed on the same graph, the market equilibrium occurs at the point where the two curves intersect (see Figure 6.4).

Recall that the perfect competition model ...

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