Market Equilibrium Prices

The interaction of the demand and supply curves sets the equilibrium price in a market

The equilibrium point is where the supply and demand curves cross

• Equilibrium price is p*
• Equilibrium quantity is q*
• Unless the demand or supply curve shift p* and q* stay the same

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Cause of changes in Equilibrium Price

Shifts in the demand or supply curve will cause the equilibrium price to change

The extent to which the price changes is dependent on the elasticity of demand / supply