Definition
The forces of demand and supply interact in the market. When the two lines cross, we refer to this as equilibrium. At this point, demand exactly equals supply, and so the market has determined the quantity that will be produced and the price for which that good or service will be traded.
The data in the table to the left can be represented by the graph on the right. From this it is easy to determine the equilibrium point.
| Price |
Demand |
Supply |
| $1 |
300 |
100 |
| $2 |
250 |
150 |
| $3 |
200 |
200 |
| $4 |
150 |
250 |
| $5 |
100 |
300 | |
 |
In this market, the product will sell for $3, and there will be 200 units sold at that price.
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