Market Equilibrium

A market doesn't need anyone in charge to find its price. At any price above equilibrium, sellers offer more than buyers want, so unsold stuff piles up and sellers cut prices to move it. At any price below equilibrium, buyers want more than sellers have made, so shortages push buyers to bid prices up. Only at one price does the quantity buyers choose exactly match the quantity sellers choose — nothing is left over, and nothing is missing. That price has no force pushing it away from itself, which is why the market settles there instead of drifting.

Graphically, this is just where the demand curve and supply curve cross. Algebraically, you set quantity demanded equal to quantity supplied and solve for price, then plug that price back into either equation to get the equilibrium quantity. With Qd = 100 - 5P and Qs = 20 + 3P, setting them equal gives 100 - 5P = 20 + 3P, so 80 = 8P, so P = 10. Plugging P = 10 into either equation gives Q = 50. At a price of 10 dollars, buyers want exactly 50 units and sellers supply exactly 50 units.

Equilibrium is a description of balance, not a judgment of fairness or welfare. A price can clear the market and still leave some buyers priced out and some sellers barely scraping by — equilibrium only promises that quantity demanded equals quantity supplied, nothing about who's happy. This matters once you start shifting curves: when a new seller enters an already-cleared market, supply shifts right, the old price no longer clears the market, and the market gropes its way — through surplus and price-cutting — toward a new, lower equilibrium price and higher quantity.