Economic Equilibrium

Economic equilibrium is a status update for a market where the market’s demand equals the market’s supply. On a graph, economic equilibrium is point where the upward sloping supply curve crosses the downward sloping demand curve.

Now that you know where economic equilibrium is, what’s the point of this point? The point refers to a certain price on the y-axis and a certain quantity on the x-axis. From the demand side, that means there is demand for x-amount of goods and y-price. From the supply side, that means they’re willing to supply x-amount of good at y-price.

In economic equilibrium, there’s not a shortage (not enough supply for demand) and there’s not a surplus (too much supply for demand). It’s like Goldilocks chair-hopping: the one that’s “just right” and everything fits is economic equilibrium.