Price Determination Definition

Equilibrium price arises when all the commodities in the market will be cleared at that price.

Equilibrium quantity arises when what is being brought to market by the seller is being bought by the consumers at equilibrium cost.

            Note:   P_e, Q_e   = equilibrium as market is cleared

                        D < S   = surplus

                        D₁ > S₁ = shortage

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